Business advice
and accounting

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Your partners for Business Service and Advisory, Taxation, Audit, Business Valuation, Forensic Accounting and Business Valuation Services.

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

We are always looking for ways to engage and give back to our community.

Telephone: +612 9283 1666
Email: admin@esvgroup.com

Level 13, 68 York Street,
Sydney NSW 2000

Why us

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

What we do

Your partners for Business Service and Advisory, Taxation, Audit, Business Valuation, Forensic Accounting and Business Valuation Services.

Who do we help

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

Work with us

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

What we think

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

Working to give back

We are always looking for ways to engage and give back to our community.

Contact us

Telephone: +612 9283 1666
Email: admin@esvgroup.com

Level 13, 68 York Street,
Sydney NSW 2000

Additional complexity for Non-resident Trust beneficiaries

18 November 2019

by David Prichard

The Australian Tax Office (ATO) have recently released two draft taxation determinations TD 2019/D6 and /D7, which address the tax treatment of capital gains distributed by Australian resident trusts to non-resident beneficiaries.

Generally, non-residents are only subject to Australian Capital Gains Tax (CGT) on Taxable Australian Property (TAP) which covers a wide range of items but mainly direct and indirect interests in Australian real property.  As such, other assets (eg shares in non-property-owning Australian companies) would not be taxed in Australia, nor would shares in a foreign company held by a non-resident.

The ATO views in TD 2019/D6 and D7 complicate this position where a capital gain is made indirectly by the non-resident.  The specific focus of these two Tax Determinations is in respect of distributions made from an Australian resident discretionary trust.

The impact of the two draft Tax Determinations, is that Australian tax would be payable where a gain on an Australian non-TAP asset or a foreign asset is distributed to non-resident taxpayer by a discretionary trust.  The ATO’s view is that the trustee of the trust would be assessable as well as the non-resident taxpayer with the non-resident receiving a credit for the tax paid by the trustee.

This is a significant clarification, as the same non-TAP capital gain made by a non-resident taxpayer in their own right or indirectly from a fixed trust would be disregarded for Australian tax.  Distributions from a fixed trust are specifically dealt with under the law to provide an exclusion, so too is an individual’s position.

Based on the draft Tax Determinations, trustees will need to carefully consider distribution strategies where there are non-resident beneficiaries and non-TAP or foreign capital gains.  Historically, these might have been distributed to non-residents, but this may now not be the most preferential distribution strategy.

TD 2019/D7 (dealing with foreign capital gains) when finalised will come into effect for the 2019-20 tax year with no retrospective application.  TD 2019/D6 is however, scheduled to apply before and after it is finalised.

Should you have any questions in relation to the above or be considering distribution strategies please contact your ESV engagement partner on 02 9283 1666.