Issue
Can a non-resident who disposes of a residential property located in Australia make a capital gain or loss under section 136-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes, a capital gain or capital loss can arise under section 136-10 of the ITAA 1997 as the property has the necessary connection with Australia as defined in section 136-25 of the ITAA 1997.
Facts
A non-resident owned a residential property in Australia.
The non-resident disposed of the property.
Reasons for Decision
Section 136-10 of the ITAA 1997 sets out the circumstances when a non-resident can make a capital gain or capital loss from a CGT event. For CGT event A1 (disposal of a CGT asset) a capital gain or capital loss can be made by a non-resident if the CGT asset the subject of the CGT event, has the necessary connection with Australia. Each category of asset listed in section 136-25 of the ITAA 1997 is relevant for CGT event A1.
Section 136-25 of the ITAA 1997 sets out a table listing nine categories of CGT assets that have the necessary connection with Australia. Category 1 in the table states that the following assets (relating to land) have the necessary connection with Australia: (a) land, or a building or structure in Australia; (b) an interest in land in Australia, or a right, power or privilege to do with land in Australia; (c) a stratum unit in Australia, or an interest in a stratum unit in Australia; (d) a share in a company that owns a building on land in Australia that gives you a right to occupy a flat or home unit in the building.
The non-resident owned a residential property located in Australia. The property is a CGT asset which has the necessary connection with Australia under section 136-25 of the ITAA 1997. The non-resident can make a capital gain or capital loss under section 136-10 of the ITAA 1997 when that property is sold.