Since December 2006, capital gain categories have been further sub-classified as:
- Taxable Australian Real Property (TARP) capital gains, or
- Non-Taxable Australian Real Property (NTARP) capital gains.
TARP capital gains refer to capital gains made upon the disposal of interests in Australian real property. TARP capital gains may arise from a direct or indirect interest in real property.
A direct interest in real property is simply a direct ownership interest in Australian real property (eg an interest in an investment property). Broadly, an indirect interest in Australian real property is an interest in an entity which passes BOTH the non-portfolio interest test and the principal asset test.
- The non-portfolio interest test is satisfied where the taxpayer (and any associates) holds an interest of 10% or more in another entity
- Broadly, the principal asset test is satisfied if the sum (by way of market value) of the entity’s TARP assets is greater than the sum (by way of market value) of the entity’s NTARP assets.