Capital gains tax: meaning of 'resident trust for CGT purposes'

Is a trust a 'resident trust for CGT purposes' as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. As the trust is not a unit trust it will be a 'resident trust for CGT purposes' as defined in subsection 995-1(1) of the ITAA 1997 because the trustee is a resident of Australia.

A trust is established. Interests in the trust are not denominated in units.

The trustee of the trust is an individual.

At all times the trustee has resided in Australia.

The expression 'resident trust for CGT purposes' is defined in subsection 995-1(1) of the ITAA 1997. There are separate tests for unit trusts and other trusts: 'A trust is a resident trust for CGT purposes for an income year if, at any time during the income year: a) for a trust that is not a unit trust, a trustee is an Australian resident or the central management and control of the trust is in Australia, or b) for a unit trust...'

The test in paragraph (a) is relevant in these circumstances because the trust is not a unit trust. Consideration therefore needs to be given to the residence of the trustee or to the place of central management and control of the trust.

Subsection 995-1(1) of the ITAA 1997 provides that an Australian resident is a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

A person is a resident of Australia for the purposes of the ITAA1936 if the definition in subsection 6(1) of the ITAA 1936 is satisfied. There are four tests for determining whether an individual is a resident in Australia. The main test is that the individual resides in Australia according to ordinary concepts.

In this situation, the trustee has always resided in Australia according to ordinary concepts and is therefore an Australian resident. Because the trustee is an Australian resident the trust is a resident trust for CGT purposes.