30 Jul 09 Decision Impact Statement - Virgin and Undershaft cases
On 29 July 2009, the ATO issued a Decision Impact Statement in relation to the Federal Court cases of Virgin Holdings SA v FCT  FCA 1503; 2008 ATC 20-051; 70 ATR 478 (Edmonds J) and Undershaft (No 1) Limited and Undershaft (No 2) BV v FCT  FCA 41; (2009) 2009 ATC 20-091; 175 FCR 150; 253 ALR 280 (Lindgren J). The Statement outlines the ATO's response to the two cases, which raised the issue of whether Double Tax Agreements (DTAs) entered into prior to the CGT regime in Australia denied the Commissioner the right to tax capital gains derived in Australia by foreign residents. The cases held that they did.
The Commissioner accepts that with two separate decisions at first instance reaching a common conclusion in relation to substantially common issues, there has now been sufficient clarification of the law. Accordingly, the Commissioner has withdrawn his appeal against the decision of Edmonds J in the Virgin Holdings matter. The appeal period in the Undershaft matters expired on 3 March 2009 and the Commissioner has not appealed the decision of Lindgren J in those matters.
It is noted in the Decision Impact Statement that as Australia has renegotiated a number of the DTAs that were in force in 1985, including those with many of Australia's significant trading partners (e.g. the United States of America, the UK, New Zealand, Canada) these decisions will have a somewhat limited application.
Finally, the Decision Impact Statement states that TR 2001/12 (Income tax and capital gains tax: capital gains in pre-CGT tax treaties) will be withdrawn and TR 2001/13 (Income tax : Interpreting Australia's Double Tax Agreements) will be amended, in so far as it refers to TR 2001/12.
For a copy of the Decision Impact Statement, go here