Issue
Are the worldwide CGT assets of a non-resident of Australia included in the net value of their CGT assets in determining if they satisfy the maximum net asset value test in section 152-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The worldwide CGT assets of a non-resident of Australia are included in the net value of their CGT assets in determining if they satisfy the maximum net asset value test in section 152-15 of the ITAA 1997.
Fact
A non-resident disposed of a farm in Australia and made a capital gain.
The net value of the non-resident's (and other related entities) CGT assets having the necessary connection with Australia does not exceed $5 million. The net value of the non-resident's worldwide CGT assets exceeds $5 million.
Reasons for Decision
A non-resident makes a capital gain or capital loss from a CGT event only if the CGT asset has the necessary connection with Australia (section 136-10 of the ITAA 1997). The categories of CGT assets having the necessary connection with Australia are set out in section 136-25 of the ITAA 1997. Land in Australia is a CGT asset having the necessary connection with Australia.
If a non-resident makes a capital gain under section 136-10 of the ITAA 1997, the small business CGT concessions may apply if all the conditions are satisfied.
One of the conditions is the maximum net asset value test in section 152-15 of the ITAA 1997. Under this test, the net value of the CGT assets of the taxpayer and certain related entities must not exceed $5 million.
Section 152-20 of the ITAA 1997 includes all the CGT assets of the taxpayer and related entities (subject to the exclusions in section 152-20 of the ITAA 1997) regardless of whether they are located in Australia or elsewhere.
Accordingly, a non-resident's worldwide CGT assets are included in the net value of their CGT assets in determining if they satisfy the $5 million maximum net asset value test in section 152-15 of the ITAA 1997.