Edited version of private advice

Authorisation Number: 1052216220992

Date of advice: 14 February 2024

Ruling

Subject:Temporary residents - disregarded capital gains

Question 1

Is the taxpayer a Temporary Resident of Australia pursuant to section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

The taxpayer is a resident in a foreign jurisdiction holding a Subclass XXX special category visa under the Migration Act 1958 and therefore qualifies as a temporary resident.

Question 2

Are the shares in Company A Taxable Australian Property pursuant to section 855-15 of the ITAA 1997?

Answer

No.

The shares are not real property located within Australia. The shares are not an indirect real property interest pursuant to section 855-25 of the ITAA 1997 on the basis that those shares held by the taxpayer do pass the non-portfolio test as they hold more than 10% but they do not pass the principal asset test as defined in section 855-30 of the ITAA 1997 and both are required to consider the shares as an indirect real property interest.

Question 3

Would the capital gain of the taxpayer be disregarded under section 855-10 of the ITAA 1997 if the taxpayer was a foreign resident?

Answer

Yes.

Capital gains of foreign residents are disregarded if the capital gains tax (CGT) event happens in relation to a CGT asset that is not taxable Australian property pursuant to section 855-10(1)(b) of the ITAA 1997. The shares in Company A are not Taxable Australian Property pursuant to Items 1-5 of the table in section 855-15 of the ITAA 1997 that determined when CGT assets are Taxable Australian Property.

Question 4

Is the capital gain on the disposal of the taxpayer's interest in Company A disregarded pursuant to section 768-915 of the ITAA 1997?

Answer

Yes

The taxpayer was a temporary resident as at the disposal date of the Shares and derived a capital gain from an A1 CGT event. The capital gain would have been disregarded under section 855-10 of the ITAA 1997 when, or immediately before the CGT event happens if the taxpayer was a foreign resident therefore the gain is disregarded pursuant to section 768-915 of the ITAA 1997.

This ruling applies for the following period:

1 July 20XX to 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The taxpayer is a citizen of foreign jurisdiction who immigrated to Australia on DD MM 20XX.

Prior to their immigration to Australia, the taxpayer did not spend 365 days or more in Australia, between DD MM 19XX and DD MM 20XX (inclusive).

The taxpayer has never claimed a payment under the Social Security Act 1991.

The taxpayer was equal shareholders with their marital spouse in an Australian resident company (Company A) and its controlled entities. The taxpayer owned 50% of the shares in Company A.

The taxpayer sold their portion of the Shares on DD MM 20XX and derived a capital gain.

The total assets of Company A and its associates is less than 50% of taxable Australian real property pursuant to the Fixed Asset Register and Balance Sheet provided with the application for a private binding ruling.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 768-915

Income Tax Assessment Act 1997 section 855-10

Income Tax Assessment Act 1997 section 855-15

Income Tax Assessment Act 1997 section 855-25

Income Tax Assessment Act 1997 section 855-30

Income Tax Assessment Act 1997 section 995-1

Migration Act 1958

Does IVA apply to this private ruling?

No.