Tax Laws Amendment (2013 Measures No. 2) Act 2013 (124 of 2013)

Schedule 7   Removing CGT discount for foreign individuals

Income Tax Assessment Act 1997

6   At the end of Subdivision 115-B

Add:

115-105 Foreign or temporary residents - individuals with direct gains

Object

(1) The object of this section (with section 115-115) is to adjust the discount percentage so as to deny you a discount to the extent that you accrued a *capital gain while a foreign resident or *temporary resident.

When this section applies

(2) This section applies to a *discount capital gain if:

(a) you are an individual; and

(b) you *acquire a *CGT asset; and

(c) you make the discount capital gain from a *CGT event happening in relation to the CGT asset; and

(d) the period (the discount testing period ):

(i) starting on the day you acquired the CGT asset; and

(ii) ending on the day the CGT event happens;

ends after 8 May 2012; and

(e) you were a foreign resident or *temporary resident during some or all of so much of that period as is after 8 May 2012.

Note: Section 115-30 has special rules about when assets are acquired.

Changed residency status

(3) For the purposes of this section and section 115-115, if:

(a) another individual owned the *CGT asset on a particular day before the discount testing period ends; and

(b) on that day, that individual was one of the following (that individual’s residency status ):

(i) an Australian resident (but not a *temporary resident);

(ii) a temporary resident;

(iii) a foreign resident; and

(c) section 115-30 treats you as having *acquired the CGT asset when that individual, or an earlier owner of the CGT asset, acquired it;

you are treated as having the same residency status on that day as that individual had on that day.

115-110 Foreign or temporary residents - individuals with trust gains

Object

(1) The object of this section (with section 115-115) is to adjust the discount percentage so as to deny you a discount for a *capital gain you make because of section 115-215 to the extent that the gain was accrued while you were a foreign resident or *temporary resident.

When this section applies

(2) This section applies to a *discount capital gain if:

(a) you are an individual and a beneficiary of a trust ( your trust ); and

(b) because of section 115-215, Division 102 applies to you as if you had made the discount capital gain on a particular day ( your gain day ) for a *capital gain (the relevant trust gain ) of the trust estate; and

(c) the period (the discount testing period ) worked out from the following table ends after 8 May 2012; and

(d) you were a foreign resident or *temporary resident during some or all of so much of that period as is after 8 May 2012.

Note: Section 115-30 has special rules about when assets (including membership interests in trusts) are acquired.

Changed residency status

(3) For the purposes of this section and section 115-115, if:

(a) your trust is a *fixed trust and another individual owned your *membership interest in your trust on a particular day before the discount testing period ends; and

(b) on that day, that individual was one of the following (that individual’s residency status ):

(i) an Australian resident (but not a *temporary resident);

(ii) a temporary resident;

(iii) a foreign resident; and

(c) section 115-30 treats you as having *acquired your membership interest in your trust when that individual, or an earlier owner of that membership interest, acquired it;

you are treated as having the same residency status on that day as that individual had on that day.

115-115 Foreign or temporary residents - percentage for individuals

(1) This section applies if section 115-105 or 115-110 applies to a *discount capital gain.

Periods starting after 8 May 2012

(2) If the discount testing period starts after 8 May 2012, the following (expressed as a percentage) is the percentage resulting from this section:

(Number of days during discount testing period that you were an Australian resident (but not a *temporary resident)) / (2 x Number of days in discount testing period)

Note 1: The percentage will be 0% if you were a foreign resident or temporary resident during all of the discount testing period.

Note 2: Subsection 115-105(3) or 115-110(3) may change your residency status for this formula.

Periods starting earlier - Australian residents

(3) If:

(a) the discount testing period starts on or before 8 May 2012; and

(b) you were an Australian resident (but not a *temporary resident) on 8 May 2012;

the following (expressed as a percentage) is the percentage resulting from this section:

(Number of days in discount testing period) - (Number of apportionable days that you were a foreign resident or *temporary resident) / (2 x Number of days in discount testing period)

where:

apportionable day means a day, after 8 May 2012, during the discount testing period.

Note: Subsection 115-105(3) or 115-110(3) may change your residency status for this formula.

Periods starting earlier - other residents may choose market value

(4) The percentage resulting from this section is worked out from the following table if:

(a) the discount testing period starts on or before 8 May 2012; and

(b) you were a foreign resident or *temporary resident on 8 May 2012; and

(c) the most recent *acquisition (before the *CGT event) of the *CGT asset happened on or before 8 May 2012; and

(d) the CGT asset’s *market value on 8 May 2012 exceeds the amount that was its *cost base at the end of that day; and

(e) you choose for this subsection to apply.

Note 1: The CGT event and CGT asset are those expressly or impliedly referred to in section 115-105 or 115-110.

Note 2: Section 115-30 has special rules about when assets are acquired.

(5) For the purposes of table item 2 in subsection (4), the following (expressed as a percentage) is the percentage resulting from this section:

excess formula
              

where:

apportionable day means a day, after 8 May 2012, during the discount testing period.

eligible resident means an Australian resident who is not a *temporary resident.

excess means the excess from paragraph (4)(d).

shortfall means the amount that the excess falls short of the amount of the *discount capital gain.

Note: Subsection 115-105(3) or 115-110(3) may change your residency status for this formula.

Periods starting earlier - other residents not choosing market value

(6) If:

(a) the discount testing period starts on or before 8 May 2012; and

(b) you were a foreign resident or *temporary resident on 8 May 2012; and

(c) subsection (4) does not apply;

the following (expressed as a percentage) is the percentage resulting from this section:

(Number of apportionable days that you were an Australian resident (but not a *temporary resident)) / (2 x Number of days in discount testing period)

where:

apportionable day means a day, after 8 May 2012, during the discount testing period.

Note 1: The percentage will be 0% if you were a foreign resident or temporary resident on each of the apportionable days.

Note 2: Subsection 115-105(3) or 115-110(3) may change your residency status for this formula.

115-120 Foreign or temporary residents - trusts with certain gains

(1) The object of this section is to adjust the discount percentage so as to deny a trustee a discount for a *capital gain for which the trustee is liable:

(a) to be assessed; and

(b) to pay tax;

under section 98 of the Income Tax Assessment Act 1936 in relation to the trust estate in respect of a beneficiary to the extent that the beneficiary was a foreign resident or *temporary resident.

(2) This section applies to a *discount capital gain of a trust estate if:

(a) you are the trustee of that trust; and

(b) section 115-220 applies to you in relation to the discount capital gain and a beneficiary of the trust who is an individual.

(3) The percentage resulting from this section is the same as the *discount percentage for the corresponding *discount capital gain the beneficiary would have made for the purposes of Division 102 had section 115-215 applied to the beneficiary.