Australian court rules that limited partners are the relevant taxpayers for gains realized by a limited partnership

May 2013

Overview

The Australian Federal Court recently held in Resource Capital Fund III LP v Commissioner (RCF) that the limited partners of a Cayman Islands limited partnership (LP), not the LP itself, are the relevant taxpayers with respect to the gain the LP made on its disposal of an Australian investment.

Essentially, the RCF case confirms that it is possible to look through an LP to identify the relevant taxpayer for purposes of applying a tax treaty. Therefore, when US investors invest into Australia through an LP, they might be able to apply the Australia-US double tax treaty when determining whether the gain on disposal of the Australian investment by the LP should be subject to Australian tax.

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