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Ruling
Subject: Trust resettlement
Question
Will a change in trustee trigger the happening of CGT event E1?
Answer: No
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts and circumstances
The Trust Deed allows a change of trustee to occur.
It is your intention to establish a company which will then become the trustee for the Trust.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-55.
Reasons for decision
A trust resettlement will occur for income tax purposes where one trust estate has ended and another has replaced it. The effect of such a resettlement is that a disposal of the trust assets is deemed to occur. In consequence, capital gains could accrue to beneficiaries as a result of various CGT events.
Tax Determination TD 2012/D4 sets out the Commissioner's view in respect to trust resettlements and whether or not a resettlement has occurred.
TD 2012/D4 asserts that a valid amendment to a trust will not result in the termination of a trust as long as:
· the amendment is made pursuant to an existing power;
· the amendment does not cause the trust to terminate for trust law purposes; and
· the effect of the amendment does not lead to a particular asset being subject to a separate charter of rights and obligations such as to give rise to the conclusion that that asset has been settled on terms of a different trust.
If these conditions are met CGT event E1 in section 104-55 of the Income Tax Assessment Act 1997 (ITAA 1997) will happen.
Therefore as the Trust Deed allows for a change of trustee, in line with the conditions declared in TD 2012/D4, CGT event E1 does not arise.
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