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Australia: ATO’s proposals could subject non-residents to tax

Australia: Proposals could subject non-residents to tax

The Australian Taxation Office (ATO) released drafts of two taxation determinations that may have the effect of bringing non-residents into the Australian “tax net”—notwithstanding that there is no gain sourced in Australia.

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  • In the first draft taxation determination, TD 2019/D6, the ATO stated that it does not consider that foreign residents are entitled to disregard capital gains on non-taxable Australian property when distributed by an Australian-resident non-fixed trust.
  • In the second (and related) draft taxation determination, TD 2019/D7, the ATO concluded that the source concept is not relevant in determining whether the gain is assessable to the non-resident or trustee.


KPMG observation

These draft taxation determinations could act as a disincentive to certain foreign resident investors and could provoke restructuring of current holdings to preserve the tax profile of current investments. There may also be broader consequences for managed investment trusts that do not benefit from deemed fixed trust status as “attribution managed investment trusts” (AMITS).
 

Read an October 2019 report prepared by the KPMG member firm in Australia

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