CGT Exemption for Non-residents Finally Law

Background

The extensive changes (mostly concessional) to Australian capital gains tax (“CGT”) for non-residents first announced in the 2005-06 Budget, are now law.  The Bill to enact this announcement, introduced into Parliament in June this year, received the Royal Assent on 12 December after a troubled passage through the Parliament.

The measure struck difficulties in August when it was unexpectedly referred to the Senate Economics Committee for review.  The majority of the Committee eventually supported passage of the Bill, albeit with some reservations expressed by Labor Senators and despite a minority report from Senator Murray.

There were also rumours in September about possible amendments to the Bill.  The speculation proved to be unfounded – two technical amendments were made; both were advantageous to taxpayers (one gives a deemed cost to the few non-residents who are brought into Australia’s CGT regime by these measures and the other improves the interaction of the CGT exemption with the demerger rules).

The Bill was then delayed by another month to allow discussions with Senators Joyce and Fielding.

The Bill passed both Houses of Parliament earlier this week and has now received Royal Assent.

Commencement

The relevant provisions thus became law on the day on which the Act received Royal Assent.  The Act applies to “CGT events” that occur on and after that day.  Hence, sales occurring pursuant to contracts entered into on and after 12 December 2006 will be covered by the new measures.