Treasury on Mon 26.5.2014, released exposure draft legislation which proposes to address a technical issue identified in Australia’s foreign resident CGT regime. Specifically, the exposure draft amendments aim to clarify the definition of permanent establishments located in Australia. The correction is designed to ensure that foreign residents are subject to CGT in relation to CGT assets that they have used in carrying on a business through a permanent establishment located in Australia.

The amendments are proposed to apply to CGT events that happen on or after the commencement of item 112 of Sch 4 to the Tax Laws Amendment (2006 Measures No 4) Act 2006 (ie from the commencement of Div 855).

COMMENTS are due by 9 June 2014.

[LTN 99, 26/5/14]

Tax and Superannuation Laws Amendment (2014 Measures No. 3) Bill 2014 (Draft)

Income Tax Assessment Act 1997


5              1 Section 855-15 (cell at table item 3, column headed

6                “Description”)

7                Repeal the cell, substitute:

A *CGT asset that:

(a) you have used at any time in carrying on a *business through: (i) if you are a resident in a country that has entered into an

*international tax agreement with Australia containing

a *permanent establishment article—a permanent establishment (within the meaning of the relevant international tax agreement) in Australia; or

(ii) otherwise—a *permanent establishment in Australia; and

(b) is not covered by item 1, 2 or 5 of this table

8              2 After section 855-15

9                Insert:

10              855-16 Meaning of permanent establishment article

11                           A permanent establishment article is:

12                              (a) Article 5 of the United Kingdom convention (within the

13                                       meaning of the International Tax Agreements Act 1953); or

14                              (b) a corresponding provision of another *international tax

15                agreement.