High Court refuses special leave application in capital gains tax dispute

The High Court has refused the special leave application by the taxpayer in a case involving the liability to capital gains tax (CGT) of a ‘limited partnership’ formed in the Cayman Islands. The application for special leave followed the Commissioner’s success (on appeal) in Commissioner of Taxation v Resource Capital Fund III LP [2014] FCAFC 37 (RCF decision). This decision was reported in the 1 May 2014 TaxTalk Monthly

In the RCF decision, the Full Court held that the limited partnership (which was a non-resident)  was assessable under the CGT regime on the sale of shares in a mining company. At issue was whether the shares were an ‘indirect real property interest’ and ‘Taxable Australian Property’ under Division 855 of the Income Tax Assessment Act 1997 (ITAA 1997). The Full Court held that the shares satisfied the definitions.

In finding in favour of the Commissioner, the Full Court also held that the double tax agreement treaty between Australia and the United States of America (US DTA) did not prevent the Commissioner from assessing the capital gain made by the limited partnership. Relevantly, the Full Court found that the limited partnership was an independent taxable entity in Australia, and was not entitled to the benefits of the US DTA as it was not a resident of the United States of America.

The limited partnership (i.e. the taxpayer) had only applied for special leave in respect of the Full Court’s determination that the US DTA did not prevent the Commissioner from assessing the limited partnership on the capital gain. In dismissing the taxpayer’s application, the High Court said that the decision of the Full Court was not attended by sufficient doubt to warrant a grant of special leave.

New Zealand: Tax Tips October 2014

PwC New Zealand’s Tax Tips October 2014 provides insights, commentary and up-to date news relating to New Zealand tax developments.

Australia/Switzerland Tax Treaty enters into force

On 20 October 2014, the Acting Assistant Treasurer published a Notice in the Commonwealth Gazette, advising that the Convention between Australia and the Swiss Confederation for the Avoidance of Double Taxation with respect to Taxes on Income, with Protocol (‘Australia-Switzerland tax treaty’) entered into force on 14 October 2014.