Foreign residents attempting to avoid Australian capital gains tax by certain 'staggered sell down' arrangements

A foreign resident vendor will typically have an existing membership interest of 10% or greater in a resident entity whose assets consist principally of Australian real property 2. The foreign resident vendor enters into an arrangement to dispose of part of its interest, retaining just less than 10% of that interest under a sale agreement 3. The foreign resident vendor concurrently enters into an option agreement to dispose of the remaining interest at a later time 4. This is intended to ensure that the foreign resident vendor can argue that they do not maintain a 10% or more membership interest at both: (a) the time of the second disposal, and (b) throughout a 12 month period that began no earlier than 24 months before that time and ends no later than that time. 5. Such structural planning may result in some capital gains tax being circumvented despite the fact that overall, a greater than 10% interest was held and eventually disposed of by the foreign resident vendor.