ATO Interpretative Decision
ATO ID 2003/554 (Withdrawn)
Income Tax
Capital gains tax: application of CGT event E2 - discretionary trust transfers assets to another discretionary trustFOI status: may be released
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This ATO ID has been withdrawn as the view expressed in it is being reconsidered.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Will the exception in paragraph 104-60(5)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the transfer of assets from a discretionary trust to another discretionary trust?
Decision
Yes. The beneficiaries and terms of the trusts are the same. Therefore, the exception in paragraph 104-60(5)(b) of the ITAA 1997 will apply.
Facts
A proportion of the assets of a discretionary trust (the original trust) will be transferred to another discretionary trust (the new trust) which is yet to be established.
The consideration for the transfer will be the transfer of beneficiaries' debt.
The trustee, appointor, and establishment date for the new trust will be different to the original trust.
In all other respects, the trust deed for the new trust, including the vesting date, will be identical to the deed for the original trust.
Both trusts will be governed by the same State laws.
Reasons for Decision
CGT event E2 happens when a CGT asset is transferred to an existing trust (subsection 104-60(1) of the ITAA 1997). The event happens when the asset is transferred (subsection 104-60(2) of the ITAA 1997). Therefore, CGT event E2 will happen when the original trust transfers a proportion of its assets to the new trust, unless the exception in paragraph 104-60(5)(b) of the ITAA 1997 applies.
The exception in paragraph 104-60(5)(b) of the ITAA 1997 applies if an asset is transferred to a trust from another trust and the beneficiaries and terms of both trusts are the same. For this exception to apply the beneficiaries and terms of the original trust and the new trust would have to be the same.
The beneficiaries of the original trust will be the only beneficiaries of the new trust. The interests held by those beneficiaries in the transferred assets, which will become the trust property of the new trust, will be the same as the interests they have currently under the original trust. The vesting date for the new trust will be the same as the vesting date for the original trust. The fact the trust deeds will otherwise be identical means that the powers and discretions of the trustee for the new trust will be identical to those of the trustee of the original trust. Also, because both trusts will be governed by the same State laws, powers granted to the trustees by relevant State trust legislation will be the same.
Even though the new trust has a different trustee, appointor and establishment date, the terms upon which the trustee of the new trust will hold the relevant property are the same.
As the beneficiaries and terms of the original trust and the new trust will be the same, the exception in paragraph 104-60(5)(b) of the ITAA 1997 will apply to the transfer of assets between the trusts. Therefore, CGT event E2 will not happen when the assets are transferred from the original trust to the new trust.
Date of decision: 5 June 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
subsection 104-60(1)
subsection 104-60(2)
paragraph 104-60(5)(b)
ATO ID 2002/1012
ATO ID 2003/330
Keywords
Capital gains tax
CGT events E1-E9 - trusts
Discretionary trusts
Entities & taxpayer groups
Trusts
ISSN: 1445-2782
| Date: | Version: | |
| 5 June 2003 | Original statement | |
| You are here | 13 May 2005 | Archived |