Guide to capital gains tax 2016

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What's new

Foreign resident capital gains withholding payments

The foreign resident capital gains withholding regime can apply in the 2016 income year to foreign residents with a 2016 income tax year ending after 30 June 2016, in relation to contracts entered into on or after 1 July 2016.

A 10 percent non-final withholding obligation will apply to the disposal of:

• taxable Australian real property with a market value of $2 million or more
• an indirect Australian real property interest
• an option or right to acquire such property or interest.

Where the seller of these Australian assets is a foreign resident, the buyer must pay 10 per cent of the purchase price to the ATO as a foreign resident capital gains withholding payment.

The foreign resident vendor can claim a credit for the foreign resident capital gains withholding payment by lodging a tax return for the relevant year.

See New legislation for more information about foreign resident capital gains withholding:

• obligations
• exclusions, and
• exceptions.

New tax system for managed investment trusts

Managed investment trusts (MITs) have access to a new tax system, which modernises the tax rules for eligible MITs and increases certainty for investors. The new rules are intended to enhance the international competitiveness of the Australian managed funds industry, and promote the greater export of Australia's funds management expertise.

Eligible MITs can elect into the new rules from 1 July 2015 to attribute trust income to beneficiaries on a fair and reasonable basis according to their ownership interests in the MIT. An eligible MIT electing into the system is known as an attribution managed investment trust (AMIT).

Among other things, the new tax system introduces provisions relating to amounts that affect the cost base of a member's interest in the trust.

Find out more:

Trust distributions

Look-through CGT treatment for earnout rights

aA new look-through CGT treatment applies to look-through earnout rights created on or after 24 April 2015.

Under the look-through CGT treatment:

• the capital gains or losses in respect of look-through earnout rights are disregarded;
• for the buyer, any financial benefit provided (or received) under a look-through earnout right increases (or decreases) the cost base and reduced cost base of the underlying asset; and
• for the seller, any financial benefit received (or provided) under the look-through earnout right increases (or decreases) the capital proceeds from the disposal of the underlying asset.

To find out more general information go to Earnout arrangement .

If you received or provided a financial benefit under a look-through earnout right in an earlier income year, you may need to seek an amendment to your net capital gain (or capital losses carried forward amount) of that earlier income year. You may be able to seek such amendment by simply completing labels 7F and 7G of the CGT. For more information go to Item 7 Earnout arrangements under Step 4 of Part C How to complete the CGT schedule.

ATO references:
NO NAT 4151