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ATO Interpretative Decision

ATO ID 2006/242 (Withdrawn)

Income tax
Canadian Convention: alienation of property - surrender of life interest in deceased estate

Attention This ATO ID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision Withdrawn 13 February 2009

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Issue

Does Australia have a taxing right under Schedule 3 the International Tax Agreements Act 1953 (the Canadian Convention) over a gain made by an Australian resident taxpayer from the surrender of a life interest in a Canadian deceased trust estate?

Decision

Yes. Australia has a taxing right under the Canadian Convention over a gain made by an Australian resident taxpayer from the surrender of a life interest in a Canadian deceased trust estate.

Facts

The taxpayer is an Australian resident for income tax purposes.

The taxpayer holds a life interest in a stream of income granted by a testamentary trust which arose from a will.

The income stream from the life interest is derived from a Canadian deceased trust estate.

The taxpayer did not pay anything for the life interest.

The taxpayer has been approached by a charity that was named as a beneficiary to surrender their life interest in exchange for a life annuity from the charity.

Reasons for Decision

Article 13 of the Canadian Convention deals with gains made by an Australian resident from the alienation of specific types of property.

Article 13(5) of the Canadian Convention provides that nothing in the Canadian Convention shall affect the application of both Australian and Canadian law relating to the taxation of gains of a capital nature derived from the alienation of any property, other than that to which any of the preceding paragraphs of this Article apply.

As paragraphs (1) to (4) of Article 13 are not applicable to the alienation of interests in an estate, Article 13(5) applies. Accordingly, the capital gain received from the alienation of the life interest will be taxable under both Australian and Canadian law.

Note: Where Australia taxes this gain, Article 23(1) of the Canadian Convention provides that, subject to provisions of the law of Australia, a credit for tax paid in Canada under the law of Canada, and in accordance with the Canadian Convention, will be allowed against Australian tax paid on income from Canadian sources.

Date of decision: 16 August 2006

Year of income:Year ended 30 June 2006

Legislative References:
International Tax Agreements Act 1953
   Schedule 3
   Schedule 3, Article 13
   Schedule 3, Article 23

Income Tax Assessment Act 1936
   section 160AFE

Keywords
Canada
Capital gains
Double tax relief
International law
Residence in Australia
Treaties

Date of publication: 8 September 2006

ISSN: 1445-2782

ATO ID 2006/242 (Withdrawn) history   Top  
   Date   Version 
   16 August 2006   Original statement   
 You are here ®  13 February 2009   Withdrawn   


 


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