In the May 2012 Budget, the Federal Treasurer announced that he
intended to remove the CGT discount for non-resident individuals on
taxable Australian property, such as real estate and mining assets.
The world then went silent.
Nearly 10 months after the Budget announcement, the Assistant
Treasurer, David Bradbury, finally released for consultation on 8
March 2013 the exposure draft legislation and associated
The legislation is significantly broader than originally
announced in the 2012 Federal Budget.
The proposed measures will apply where an individual has a
discount capital gain, including a discount capital gain as a
result of being a beneficiary of a trust, from a CGT event that
occurred after 8 May 2012 and the individual was a foreign
resident or a temporary resident at any
time on or after 8 May 2012.
The proposed measures will also apply to Australian
residents in a number of instances.
In summary, the effect of the measure will be to:
retain the full CGT discount for discount capital gains of
foreign resident individuals to the extent the increase in value of
the CGT asset occurred prior to 9 May 2012;
remove the CGT discount for discount capital gains of foreign
and temporary resident individuals accrued after 8 May 2012;
apportion the CGT discount for discount capital gains where an
individual has been an Australian resident and, a foreign or
temporary resident, during the period after 8 May 2012. The
discount percentage will be apportioned to ensure the full 50%
discount is applied to periods where the individual was an
Importantly, where an Australian resident becomes a foreign
resident, the amendments will only apply in circumstances where the
assets are taxable Australian property, including where the
individual has chosen to disregard any capital gains under CGT
event I1 triggered by their change in residency status on making
the election under s 104-165.
The proposed amendments will apply to CGT events that occur
after 8 May 2012. However, the portion of gains accrued prior to 9
May will still be eligible for the full CGT discount if the
taxpayer undertakes a market valuation of the asset as at 8 May
A number of issues are already apparent within the draft
If the changes go ahead, it will be necessary to reconsider the
vehicles in which taxable Australian property are held.
It also appears to send a negative message to people looking at
investing in Australia under the recently announced Significant
Submissions are invited to be made by 5 April 2013 in respect of
this proposed legislation.
Moore Stephens will be lodging a submission and a copy will be
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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