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AJML Accountants Update – October 2019

Residency for tax purpose – Part 4

2017 Budget – Measures affecting foreign investors

The Government introduced a range of amendments with effect from 1 July 2017, to clarify and simplify Australia’s foreign investment framework. This will make foreign investor obligations clearer, and allow for more efficient allocation of Foreign Investment Review Board screening resources to

higher risk cases. The amended framework will allow Australia’s foreign investment framework to operate more efficiently by facilitating business investment and reducing unnecessary red tape.

Taxable Australian property

Taxable Australian property includes:

  • a direct interest in real property situated in Australia
  • a mining, quarrying or prospecting right to minerals, petroleum or quarry materials situated in Australia
  • a capital gains tax (CGT) asset that you have used at any time in carrying on a business through a permanent establishment in Australia
  • an indirect interest in Australian real property – you and your associates hold 10% or more of an entity, including a foreign entity, and the value of your interest is principally attributable to Australian real property.

Taxable Australian property also includes an option or right over one of the above.

For CGT events happening on or after 20 May 2009, a leasehold interest in land situated in Australia is ‘real property situated in Australia’.

Certain CGT assets will also be taken to be taxable Australian property if you take the option of choosing to disregard capital gains and losses when you cease being an Australian resident.

If you acquired an indirect interest in Australian real property before 11 May 2005, you’re taken to have acquired it at its market value on the previous day (10 May 2005) if:

  • you’re a foreign resident or the trustee of a trust that was not a resident trust for CGT purposes
  • the interest did not have the necessary connection with Australia
  • the interest is taxable Australian property.

Foreign residents must apply functional currency rules for the calculation of capital gains and losses on disposal of indirect Australian real property interests where the sole or predominant currency in which they keep their accounts is a foreign currency.

Foreign resident PAYG withholding – for individuals

An entity is required to withhold amounts from payments to you for:

  • entertainment or sports activities
  • construction and related activities
  • casino gaming junket activities.