Legislative amendments to remove the 50 percent CGT discount concession for foreign residents (which has been extended to include temporary tax residents) have now been enacted and applies retrospectively to the disposal of CGT assets after 8 May 2012.
The amendments seek to apportion the CGT discount percentage, to ensure that the full 50 percent CGT discount is only applied to periods where the CGT asset was held:
- prior to 9 May 2012
- after 8 May 2012, when the individual is an Australian tax resident.
Individuals who make a discounted capital gain indirectly as a beneficiary of a trust are also caught by the amendments.
Australian taxpayers, who are foreign tax residents and temporary tax residents, should consider how the amendments may have impacted the 2012 and 2013 Australian tax returns that have already been lodged as well as any future impact on their assets. Some considerations include:
- whether or not to make the election out of the Australian 'deemed disposal rules' when becoming a foreign tax resident.
- whether or not to obtain a market valuation of CGT assets as at 8 May 2012. Where the CGT asset is considered 'Taxable Australian Property', the taxpayer must obtain a market valuation to ensure that the portion of the gain that accrued on the CGT asset prior to 9 May 2012 remains eligible for the full CGT discount. Where a market valuation is not obtained, no CGT discount on gains that accrued before 8 May 2012 will be available at all.
If you would like to discuss this further, contact us or your KPMG IES tax specialist.