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Edited version of private ruling
Authorisation Number: 1011625151227
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Ruling
Subject: Trust Resettlement
1. Will the appointment of a new trustee result in a trust resettlement, thereby triggering a capital gains tax (CGT) Event?
No.
2. Will a change of name of the existing corporate trustee result in a trust resettlement, thereby triggering a CGT Event?
No.
3. Will a change of name of the superannuation fund result in a trust resettlement thereby triggering a CGT Event?
No.
This ruling applies for the following periods:
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commences on:
1 July 2010
Relevant legislative provisions
Section 104-55 of the Income Tax Assessment Act 1997.
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The superannuation fund is a self managed superannuation fund and has been established to provide retirement benefits to its members.
The trust deed provided allows the trustee to vary the trust deed and for the appointment and resignation of a trustee
The trustee intends to amend the trust deed to either appoint another corporate trustee, change the name of the existing corporate trustee or change the name of the superannuation fund.
Reasons for Decision
Generally a capital gain or loss is made when a CGT event happens to a CGT asset acquired after 20 September 1985. Event E1, as provided in section 104-55 of the Income Tax Assessment Act 1997 (ITAA 1997), occurs where a trust is created over a CGT asset. This will be the case if the changes to the Trust Deed are such that a new trust is created over the trust property (the CGT assets).
The Creation of a new Trust Statement of Principles August 2001 (Statement of Principles) outlines when the Commissioner will treat changes as giving rise to a new estate.
It is noted that as the Statement of Principles is the Commissioner's view on the resettlement of trusts, the Commissioner must follow the guidelines outlined in the paper.
The Statement of Principles makes it clear that a change to the essential nature and character of the original trust relationship creates a new trust. The Statement of Principles considers a number of changes that may result in the creation of a new trust, which are listed below:
· any change in beneficial interests in trust property
· a new class of beneficial interest ( whether introduced or altered)
· a possible redefinition of the beneficiary class
· changes in the terms of the trust or the rights or obligations of the trustee
· changes in the nature or features of trust property
· additions of property which could amount to a new and separate settlement
· depletion of trust property
· a change in the termination date of the trust
· a change to the trust that is not contemplated by the terms of the original trust
· a change in the essential nature and purpose of the trust, and/or
· a merger of two or more trusts or a splitting of a trust into two or more trusts.
Depending on their nature and extent, and their combination with other indicia, these changes may amount to a mere variation of a continuing trust, or alternatively to a fundamental change in the essential nature and character of the trust relationship. In the second case, the original trust is brought to an end and/or a new trust created.
The Statement of Principles highlights that creating a new trust will depend on the terms of the original trust, and on the powers of the trustee. In addition, the original intentions of the settlor must be considered in determining whether a new trust has been created.
Paragraph 5.4 of the Statement of Principles state that a change of trustee does not itself result in a termination of the trust. If there is merely a change of trustee, the trust property with the accompanying equitable duties are assumed by the new trustee and the trust estate continues unchanged. On the other hand, a change in the trustee or control of the trustee may be an element in arrangements which in their entirety amount to the creation of a new trust.
The clauses in the trust deed provide the trustee with the power to vary the trust deed and allows for the appointment and resignation of the trustee. In this case, an additional corporate trustee is to be appointed, the name of the existing corporate trustee is to be changed or the name of the superannuation fund is to be changed.
In accordance with trust deed, the fund has been established to provide retirement benefits to the members of the fund. It is considered that either appointing another corporate trustee, changing the name of the existing corporate trustee or the name of the superannuation fund do not change the original intention of the trustee, that is, to provide retirement benefits to members of the fund. The trust property with the accompanying equitable duties remain the same and the trust estate continues unchanged.
As the proposed amendments are procedural in nature, the amendments will not give rise to a CGT event and not cause a resettlement of the trust.
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