2011 Winter

Capital Gains Tax
Capital Gains Tax and Foreign Residents
The way that capital gains tax applies to foreign residents has changed. If you are a foreign resident
and you made a capital gain before 12 December 2006 on disposal of an asset that had the necessary
connection with Australia, the gain would generally be taxed. On or after 12 December 2006, a
foreign resident makes capital gains only on the disposal of taxable Australian property. Capital
gains tax (CGT) generally does not apply to pre-CGT assets - that is, assets acquired before 20
September 1985.
Unless otherwise specified, 'Australian resident' means a resident of Australia for tax purposes.
Assets which have a necessary connection with Australia include:
land or a building in Australia (or an interest in land or a building)
a CGT asset you have used in carrying on a business through a permanent establishment in
Australia
a share in a private company that is an Australian resident company for the income year in
which the CGT event happens
a share, or an interest in a share, in a public company that is an Australian resident company
and in which you and your associates have owned at least 10% of the value of the shares at
any time during the five years before the CGT event happens
a unit in a unit trust that is a resident trust and in which you and your associates have owned
at least 10% of the issued units at any time during the five years before the CGT event happens
an interest (other than a unit) in a trust that is a resident trust for CGT purposes for the income
year in which the CGT event happens, and
an option or right to acquire any of the preceding CGT assets.
If your assets do not fit within one of the above categories - for example, land or a building overseas
or shares in a foreign company - they do not have the necessary connection with Australia.
Assets that are taxable Australian property include:
a direct interest in real property situated in Australia (for example a house or farm located in
Australia) or a mining, prospecting or quarrying right to minerals, petroleum or quarry materials
in Australia;
a CGT asset that you used at any time in carrying on a business through a permanent establishment
in Australia, and
an indirect Australian real property interest - which is an interest in an entity, including a foreign
entity, where you and your associates hold 10% or more of the entity and the value of
your interest is principally attributable to Australian real property.
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This is an extract from the ATO website.