Income Tax Assessment Act 1997
View history note
Hide history notePart 3-3 inserted by No 46 of 1998.
Div 136 repealed by No 168 of 2006 , s 3 and Sch 4 item 1, applicable to CGT events that happen on or after 12 December 2006. Div 136 formerly read:
Division 136 - Foreign residents
SECTION 136-1 What this Division is about
136-1
A foreign resident makes a capital gain or loss only if a CGT event happens to a CGT asset that has the necessary connection with Australia. There are also rules dealing with what happens when a foreign resident becomes an Australian resident.
HistoryS 136-1 amended by No 41 of 2005 and inserted by No 46 of 1998.
Subdivision 136-A - Making a capital gain or loss
SECTION 136-5 What if you are a foreign resident just before a CGT event
136-5
This Subdivision sets out what happens if just before a *CGT event happens:
(a) you are an individual or a company that is a foreign resident; or
(b) you are the trustee of a trust that is not a *resident trust for CGT purposes.SECTION 136-10 Making a capital gain or loss from most CGT eventsHistoryS 136-5 amended by No 41 of 2005 and inserted by No 46 of 1998.
136-10
You make a *capital gain or *capital loss from a *CGT event set out in this table only if the thing referred to in the relevant row of the table has the *necessary connection with Australia.The last column lists each category of *CGT asset having the *necessary connection with Australia that is relevant to the event.
Note 1:
Special rules apply to CGT events D1 and E9: see section 136-15 .
Note 2:
There are some CGT events for which you cannot make a capital gain or loss: see section 136-20 .
Note 3:
For the categories of CGT assets having the necessary connection with Australia: see section 136-25 .
Foreign resident capital gains and losses Event number Description of event: This has the necessary connection with Australia: Category of CGT asset: A1 Disposal of a CGT asset the CGT asset 1 to 9 . B1 Use and enjoyment before title passes the CGT asset 1, 2 . C1 Loss or destruction of a CGT asset the CGT asset 1, 2 . C2 Cancellation, surrender and similar endings the CGT asset 1 to 9 . D2 Granting an option the option 7 . D4 Entering into a conservation covenant the land over which the covenant is entered into 1 . E1 Creating a trust over a CGT asset the CGT asset 1 to 9 . E2 Transferring a CGT asset to a trust the CGT asset 1 to 9 . E3 Converting a trust to a unit trust the CGT asset 1 to 9 . E4 Capital payment for trust interest the units or interest in the trust 4, 6, 9 . E5 Beneficiary becoming entitled to a trust asset the CGT asset 1 to 9 . E6 Disposal to beneficiary to end income right the CGT asset 1 to 9 . E7 Disposal to beneficiary to end capital interest the CGT asset 1 to 9 . E8 Disposal by beneficiary of capital interest the interest in the trust capital 4, 9 . F1 Granting a lease the CGT asset the subject of the lease 1, 2 . F2 Granting a long-term lease the land 1 . F3 Lessor pays lessee to get lease changed the CGT asset the subject of the lease 1, 2 . F4 Lessee receives payment for changing lease the CGT asset the subject of the lease 1, 2 . F5 Lessor receives payment for changing lease the CGT asset the subject of the lease 1, 2 . G1 Capital payment for shares the shares 3, 5, 8, 9 . G2 (Repealed by No 16 of 2003) . G3 Liquidator or administrator declares shares of financial instruments worthless the shares or financial instruments 3, 5, 7, 8, 9 . H1 Forfeiture of deposit the CGT asset the subject of the prospective purchase or other transaction 1 to 9 . H2 Receipt for event relating to a CGT asset the CGT asset 1 to 9 . J1 Company ceasing to be member of wholly-owned group the CGT asset the subject of the roll-over 1 to 8 . J2 Change in status of an asset that was a replacement asset in a roll-over under Subdivision 152-E the CGT asset 1, 2, 3, 6 . J3 A change happens in circumstances where a share in a company or an interest in a trust was a replacement asset in a roll-over under Subdivision 152-E the share or unit 3, 6 . J4 J4 Trust fails to cease to exist after a roll-over under Subdivision 124-N the CGT asset disposed of or the share 1 to 9 . K1 (Repealed by No 77 of 2001) . K3 Asset passing to tax advantaged entity the CGT asset 1 to 9 . K4 CGT asset starts being trading stock the CGT asset 1 to 9 . K6 Pre-CGT shares or trust interest the shares or interest in the trust 3 to 6 . K7 Balancing adjustment event happens to a depreciating asset the depreciating asset 2 . K8 Direct value shifts affecting equity or loan interests in a company or trust the *down interest 3-9 . K10 You make a forex realisation gain covered by item 1 of the table in subsection 775-70(1) the CGT asset mentioned in that item 1 to 9 . K11 You make a forex realisation loss covered by item 1 of the table in subsection 775-75(1) the CGT asset mentioned in that item 1 to 9 SECTION 136-15 Making a capital gain or loss from CGT events D1, E9 and K9HistoryS 136-10 amended by No 41 of 2005, No 23 of 2005, No 133 of 2003, No 16 of 2003, No 53 of 2002, No 167 of 2001, No 77 of 2001, No 114 of 2000, No 89 of 2000, No 165 of 1999 and No 94 of 1999, and inserted by No 46 of 1998.
136-15(1)
You make a *capital gain or *capital loss from *CGT event D1 (about creating contractual or other rights) only if one of the items in this table is satisfied.
CGT event D1 Item In this situation: This requirement is satisfied: 1 The *capital proceeds from the event are your *ordinary income The proceeds are *derived from an *Australian source . 2 The *capital proceeds from the event are not your *ordinary income If the proceeds were your *ordinary income, they would have been *derived from an *Australian source
136-15(2)
You make a *capital gain or *capital loss from *CGT event E9 (about creating a trust over future property) only if one of the items in this table is satisfied.
CGT event E9 Item In this situation: This requirement is satisfied: 1 The consideration is your *ordinary income The consideration is *derived from an *Australian source . 2 The consideration is not your *ordinary income If the consideration was your *ordinary income, it would have been *derived from an *Australian source
136-15(3)
You make a *capital gain from *CGT event K9 (about carried interests) only if one of the items in this table is satisfied.
CGT event K9 Item In this situation: This requirement is satisfied: 1 The *capital proceeds from the event would have been your *ordinary income if section 118-21 did not apply The proceeds are *derived from an *Australian source 2 The *capital proceeds from the event would not have been your *ordinary income even if section 118-21 did not apply If the proceeds were your *ordinary income, they would have been *derived from an *Australian source HistoryS 136-15(3) inserted by No 136 of 2002.
S 136-15 amended by No 136 of 2002 and inserted by No 46 of 1998.
SECTION 136-20 Those events you cannot make a capital gain or loss from
136-20
This table sets out those *CGT events from which you cannot make a *capital gain or *capital loss.
CGT events not relevant Event number Description of event: See section: C3 End of option to acquire shares etc. 104-30 . D3 Granting a right to income from mining 104-45 . I1 Individual or company stops being an Australian resident 104-160 . I2 Trust stops being a resident trust 104-170 . K2 Bankrupt pays amount in relation to debt 104-210 . K5 Special collectable losses 104-225 SECTION 136-25 When an asset has the necessary connection with AustraliaHistoryS 136-20 amended by No 41 of 2005 and inserted by No 46 of 1998.
136-25
There are 9 categories of *CGT assets having the necessary connection with Australia . They are set out in this table.
CGT assets having the necessary connection with Australia Category number Description 1 Any of these: (a) land, or a building or structure, in Australia; (b) an interest in land in Australia, or a right, power or privilege to do with land in Australia; (c) a *stratum unit in Australia, or an interest in a stratum unit in Australia; (d) a *share in a company that owns a building on land in Australia that gives you a right to occupy a flat or home unit in the building . 2 A *CGT asset that you have used at any time in carrying on a *business through a *permanent establishment in Australia . 3 A *share, or an interest in a *share, in a company that is an Australian resident, and a *private company, for the income year in which the *CGT event happens . 4 An interest in a trust that is a *resident trust for CGT purposes for the income year in which the *CGT event happens . 5 A *share, or an interest in a *share, in a company: (a) that is an Australian resident, and a *public company, for the income year in which the CGT event happens; and (b) in which you and your *associates beneficially owned at least 10%, by value of the shares of the company (except shares that carried a right only to participate in a distribution of profits or capital to a limited extent) at any time during the 5 years before the *CGT event happens . 6 A unit in a unit trust: (a) that is a *resident trust for CGT purposes for the income year in which the CGT event happens; and (b) in which you and your *associates beneficially owned at least 10% of the issued units in the unit trust at any time during the 5 years before the *CGT event happens . 7 An option or right to *acquire a *CGT asset of the kind referred to above . 8 A *share or security in a company that you received as consideration for your *disposal of another *CGT asset to the company and: (a) you chose to obtain a roll-over under Division 122 (roll-over of assets by an individual or partnership to a company) or Subdivision 126-B (roll-over of assets within certain company groups) because of the disposal; and (b) either you were a foreign resident just before the disposal, or you were a trustee of a trust that was not a *resident trust for CGT purposes for the income year in which the disposal happened . 9 A *share, option, right or similar interest in a company or a unit, option, right or similar interest in a trust you *acquire where: (a) you choose a scrip for scrip roll-over under Subdivision 124-M for your acquisition of the interest; and (b) your original interest had the necessary connection with Australia; and (c) you are a foreign resident at the time you acquire it; and (d) the company is an Australian resident, or the trust is a *resident trust for CGT purposes, at that time Note:
An asset also has the necessary connection with Australia if it was acquired by a company after 28 January 1988 and before 26 May 1988 from a foreign resident as a result of a disposal for which there was a roll-over under former section 160ZZN or 160ZZO of the Income Tax Assessment Act 1936 : see section 136-25 of the Income Tax (Transitional Provisions) Act 1997 .
SECTION 136-30 Reducing a capital gain or loss from a business assetHistoryS 136-25 amended by No 101 of 2006 , s 3 and Sch 2 item 700, by amending the reference to a repealed inoperative provision in the note, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 136-25 amended by No 41 of 2005, No 117 of 2002, No 114 of 2000, No 89 of 2000, No 165 of 1999, No 63 of 1998, and inserted by No 46 of 1998.
136-30(1)
The *capital gain or *capital loss you make from a *CGT asset that you have used at any time in carrying on a *business through a *permanent establishment in Australia is reduced if you used it in this way for only part of the period from when you *acquired it to when the CGT event happened.
136-30(2)
The gain or loss is reduced by this fraction:
Number of days the asset was not used
in the way described in subsection (1)
Number of days in that periodS 136-30 inserted by No 46 of 1998.
Subdivision 136-B - Becoming an Australian resident
SECTION 136-40 Individual or company becomes an Australian residentHistorySubdiv 136-B (heading) substituted by No 41 of 2005.
136-40(1)
If you become an Australian resident, there are rules relevant to each *CGT asset that you owned just before you became an Australian resident, except an asset:
(a) having the *necessary connection with Australia; or
(b) that you *acquired before 20 September 1985.Note:
This section has effect subject to section 768-950 (individuals who become Australian residents and are temporary residents immediately after they become Australian residents).
HistoryS 136-40(1) amended by No 32 of 2006, s 3 and Sch 1 item 37, by inserting the note at the end, effective 6 April 2006.
136-40(2)
The first element of the *cost base and *reduced cost base of the asset (at the time you become an Australian resident) is its *market value at that time.
136-40(3)
Also, Part 3-1 and this Part apply to the asset as if you had *acquired it at the time you became an Australian resident.
136-40(4)
This section does not apply to a *share or right if:
(a) it is a *qualifying share or a *qualifying right; and
(b) you have not made an election under section 139E of the Income Tax Assessment Act 1936 covering the share or right; and
(c) the *cessation time for the share or right has not occurred.HistoryS 136-40(4) inserted by No 64 of 2005.
S 136-40 inserted by No 46 of 1998.
SECTION 136-45 Trust becomes a resident trust
136-45(1)
If a trust becomes a *resident trust for CGT purposes, there are rules relevant to each *CGT asset that the trustee owned just before the trust became a resident trust for CGT purposes, except one:
(a) having the *necessary connection with Australia; or
(b) that the trustee *acquired before 20 September 1985.
136-45(2)
The first element of the *cost base and *reduced cost base of the asset (at the time the trust becomes a *resident trust for CGT purposes) is its *market value at that time.
136-45(3)
Also, Part 3-1 and this Part apply to the asset as if the trustee had *acquired it at the time the trust became a *resident trust for CGT purposes.
Exception
136-45(4)
This section does not apply to a trust if, just before it became a *resident trust for CGT purposes, it was a *CFT because of paragraph 342(a) of the Income Tax Assessment Act 1936 .Note:
This section is disregarded in calculating the attributable income of a trust: see section 102AAZB of the Income Tax Assessment Act 1936 .
SECTION 136-50 CFC becomes an Australian residentHistoryS 136-45 inserted by No 46 of 1998.
136-50(1)
This section applies to a *CFC that stops at a time (the residence change time ) being a resident of a *listed country or an *unlisted country and becomes an Australian resident.
136-50(2)
Section 136-40 does not apply to the *CFC.
136-50(3)
The modifications of this Part and Part 3-1 in sections 411 to 414 (inclusive) of the Income Tax Assessment Act 1936 have the effect they would have, in relation to each *commencing day asset owned by the *CFC at the residence change time, if those modifications were used to work out the taxable income of the CFC rather than its *attributable income.
136-50(4)
However, if a *capital gain on a *commencing day asset of the *CFC (for a period before the residence change time) was subject to tax (within the meaning of Part X of the Income Tax Assessment Act 1936 ) in a *listed country, the modifications of this Part and Part 3-1 in sections 411 to 414 (inclusive) of the Income Tax Assessment Act 1936 have the effect they would have in relation to the asset if:
(a) those modifications were used to work out the taxable income of the CFC rather than its *attributable income; and
(b) the *commencing day of the CFC were the residence change time.Note:
This section is disregarded in calculating the attributable income of a CFC: see section 410 of the Income Tax Assessment Act 1936 .
HistoryS 136-50 inserted by No 46 of 1998.
Div 136 (heading) substituted by No 41 of 2005.
Div 136 inserted by No 46 of 1998.
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