Taxable or non-taxable?

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.

Impact of TARP and NTARP capital gains for Australian investors

An Australian resident investor pays tax on both TARP and NTARP capital gains they receive. 
 
Where the Australian investor is considered to be an intermediary for non-residents, the TARP and NTARP capital gains distinction may be important as this may impact their withholding tax (WHT) obligations in respect of their non-resident beneficiaries/investors. 
 
Broadly, an entity will be considered an intermediary where they're an Australian resident and they're in the business of predominantly providing custodial or depository services under an Australian Financial Services Licence.

How we disclose TARP capital gains

We disclose the breakdown of TARP and NTARP capital gains on the Tax Report – Summary.

  • For distributions received through unlisted managed funds and listed securities, we rely on the TARP and NTARP breakdown information provided by the product issuer at the time of a distribution
  • Where an investor has disposed of any asset during the year, we assume that any resulting capital gain realised is an NTARP capital gain on the basis that the investor did not pass the non-portfolio interest test.

We don’t separate any distributed capital gains on the Tax Report – Detailed into TARP and NTARP capital gains. 
 
Please note that we don’t identify any investor as an intermediary for tax purposes but do provide sufficient information for intermediaries to meet their WHT obligations, if any.

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