Greensill Case: Non-resident assessable on capital gains made by Australian family trust

28 April 2020

In Peter Greensill Family Co Pty Ltd (trustee) v Commissioner of Taxation [2020] FCA 559, the Federal Court has found for the Commissioner. It rejected an appeal from the taxpayer that capital gains made by an Australian family trust should not be exempt from tax because they were distributed to a non-resident of Australia, who was based in London.

The issue in the case of Peter Greensill Family Co Pty Ltd (trustee) v Commissioner of Taxation [2020] FCA 559 was whether section 855-10 of the Income Tax Assessment Act 1997 could apply in a situation where a capital gain on a CGT asset, which was not Taxable Australian Property, should be assessable if it was distributed to a beneficiary who is not a resident of Australia.

Briefly, Section 855-10 says that a taxpayer can disregard a capital gain from a CGT Event if, the person is a foreign resident and the CGT event happens in relation to a CGT asset that is not taxable Australian property.

In his judgement Justice Thawley indicated that the capital gain to be disregarded under Section 855-10 is

- that which is made by an entity immediately as a consequence of the happening of a CGT event' ;and

- that 'a capital gain which is attributed to a beneficiary, because of a CGT event happening to a CGT asset owned by a trust, was not intended to fall within the phrase "a capital gain...from a CGT event".

In the case His Honour referred to the specific exemption under Section 855-40 of ITAA 1997 under which capital gains made by a beneficiary of a fixed trust might be disregarded. However, he was not able to find any convincing example of a policy objective where such an exemption was intended to be extended to discretionary trusts.

Source: https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2020/2020fca0559