The Federal Court has recently held in the case of Peter Greensill Family Co Pty Ltd (as trustee) v FC of T that the distribution of capital gains by an Australian resident family trust made from the disposal of shares that were not “taxable Australian property” distributed to a non-resident beneficiary was deemed to be assessable to the non-resident individual. The Federal Court also held the capital gains could not be disregarded under section 855-10(1) of the Income Tax Assessment Act 1997.
Mr Greensill was subject to a capital gain of almost $60 million from the distribution of a capital gain from his Australian resident discretionary trust from the disposal of shares that were not ‘taxable Australian property’.
The decision is controversial and has confirmed the ATO’s view in Draft Taxation Determination TD 2019/D6. The decision flows from the strict interpretation of the legislation and appears to be removed from the policy intent given a non-resident beneficiary would not be assessable to Australian tax if the shares were held directly or by a fixed trust or company.
The decision in Greensill provides judicial authority to support the ATO’s position in TD 2019/D6 (unless the case is overturned on appeal).
Therefore, it is important that Australian expats who are non-resident beneficiaries of an Australian family trust consider their position and undertake sufficient planning to ensure they are not subject to Australian CGT from assets held in their family trust.