Distributions to Non-Resident Beneficiaries

The ATO has released new determinations dealing with the complex and technical issues that arise when a resident discretionary trust makes a distribution of capital gains to non-resident beneficiaries.

At present, there is a CGT exemption for non-resident taxpayers on assets that are not classified as Taxable Australian Property (TAP). This exemption can result in capital gains and losses being disregarded for non-residents in some circumstances.

The ATO's perspective is that if a resident discretionary trust makes a capital gain, it will be taxed in Australia, regardless of it is is distributed to a non-resident beneficiary, and is not TAP. This also applies to foreign source gains.

Non-resident beneficiaries will be taxed at non-resident rates, and may not have access to the full CGT discounts. Trustees of trusts that have a mixture of resident and non-resident beneficiaries should consider this carefully when deciding on distributions.