Capital gains tax: Australian resident - disposal of residential property in Singapore

Is a net capital gain, that is made up of a capital gain, made by an Australian resident taxpayer from the disposal of a residential property in Singapore assessable income under section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. A net capital gain that is made up of a capital gain, made by an Australian resident taxpayer from the disposal of a residential property in Singapore is assessable income under section 6-10 of the ITAA 1997.

The taxpayer is an Australian resident for income tax purposes.

The taxpayer owns a residential property in Singapore.

The taxpayer disposes of the property in Singapore and makes a capital gain.

The taxpayer is only entitled to a partial exemption under Subdivision 118-B of the ITAA 1997.

Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of a resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997).

Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is section 102-5 of the ITAA 1997 which provides that a net capital gain is to be included in assessable income. The capital gains from each CGT event are used in the calculation of the net capital gain (section 102-5).

However, in determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one.

Schedule 5 to the Agreements Act contains the tax treaty between Australia and Singapore (the Singapore Agreement). Schedule 5A to the Agreements Act contains the Protocol amending the Singapore Agreement (the Protocol). The Singapore Agreement and the Protocol operate to avoid the double taxation of income received by Australian and Singaporean residents.

Article 10A(1) of the Singapore Agreement provides that income or gains derived by a resident of Australia from the alienation of real property situated in Singapore may be taxed in Singapore. However, Article 10A(1) of the Singapore Agreement does not preclude taxation of these gains in Australia. Accordingly, such gains may be taxed in Singapore and Australia.

For the purposes of Article 10A(1), Article 4A(2) of the Singapore Agreement defines the term 'real property' as having the meaning which it has under the laws of Australia and Singapore and also includes any interest in or over land whether improved or not. A residential property owned by a resident taxpayer in Singapore is 'real property' as defined in Article 4A(2) of the Singapore Agreement. Therefore, any gain derived by a resident taxpayer from the disposal of the property in Singapore may be taxed in Australia under Article 10A of the Singapore Agreement.

Accordingly, a net capital gain, that is made up of a capital gain made by an Australian resident taxpayer from the disposal of a residential property in Singapore is assessable income under section 6-10 of the ITAA 1997. The capital gain and net capital gain will be calculated in accordance with the CGT provisions in the ITAA 1997.