The Administrative Appeals Tribunal (Tribunal) has held in Quy v FCT [2024] AATA 245 that a taxpayer, who was physically in Australia for less than 2 months each year, was a resident of Australian tax purposes.

We wrote here and here about the Greensill (Thawley J) and Martin (Steward J) Federal Court decisions. In those decisions the Federal Court found in favour of the Australian Taxation Office (ATO) that section 855-10 of the Income Tax Assessment Act 1997 (ITAA 1997) did not disregard a non-taxable Australian property capital gain distributed to a foreign resident beneficiary of an Australian discretionary trust.

Our international tax series predominantly discusses Federal tax issues relating to non-resident (foreign) beneficiaries or non-resident trustees of a trust. This seventh article of the series focuses on the CGT main residence exemption (CGT MRE) for non-resident beneficiaries of deceased estates.

As we discussed in Coelho v FCT [2020] AATA 2474, different tax rates apply to residents and non-residents. Further, under Pt III of Sch 7 to the Income Tax Rates Act 1986, a working holiday maker pays tax at 15% on the first $37,000 of income in Australia. Commonly referred to as the ‘backpacker tax’.

We wrote here on the decision of Thawley J of the Federal Court in Peter Greensill Family Co Pty Ltd (trustee) v FCT (Greensill) where the Commissioner of Taxation was successful in arguing that section 855-10 of the Income Tax Assessment Act 1997 (ITAA 1997) does not disregard a capital gain distributed to a foreign resident beneficiary of an Australian discretionary trust. The taxpayer has appealed that decision to the Full Federal Court.

The Australian Taxation Office (ATO) position for several years has been a foreign beneficiary distributed a capital gain made by an Australian discretionary trust on an asset that is not taxable Australian property is assessed on the capital gain even though that would not occur if the foreign resident made the gain directly, or through a fixed trust. Some commentators disagree with that view, the Federal Court in a recent case agreed with the ATO position in what may be the first skirmish of a battle through the courts on this issue.