Two cases sadly hold that foreigners in Australian discretionary trust must pay tax
on gains made on Australian assets. But these are assets that are not “taxable Australian
The Australian Family Trust sells some assets. The trust makes a capital gain. from the sale
The assets are shares. They are not land rich. Therefore, the assets are not “taxable Australian property”. This is under Division 855 Income Tax Assessment Act 1997 (ITAA 1997).
The Family Trust distributes the capital gain to a foreign resident. There should be no Australian tax payable.
But the Australian Tax Office (ATO) assesses the Trustee of the Family Trusts for CGT tax. This is under section 98 ITAA 1936. This is because the gains are still assessable by Australia.
The Court notes in passing that had each of the foreign beneficiaries made the gain directly, rather than as a result of the distribution to them of the capital gain, the capital gain would have been disregarded. This is under section 855-10.
But the judgment in these two cases contradicts that outcome. T