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Edited version of your private ruling

Authorisation Number: 1012390800038

Ruling

Subject: Trust resettlement

Question:

Will the proposed amendments to the trust deed cause a resettlement of the trust and give rise to CGT event E1 under section 104-55 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the Trust's CGT assets?

Answer: No.

This ruling applies for the following period

Year ending 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

The trust is a discretionary trust.

The directors of the trustee company are named beneficiaries under the trust deed along with their oldest child.

The trustees now propose to include their younger child as a named beneficiary as well, through a deed of variation.

Under section 4(c) of the trust deed, the default beneficiaries are the children of the named beneficiaries.

Under section 14 of the trust deed, the trustee has the power to amend all provisions of the trust deed or any amending instrument providing:

The proposed variation will not fall within the scope of any of the prohibitions in section 14 of the trust deed.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-55

Reasons for decision

The decision in Clark's case is relevant to the question of the circumstances in which, as a result of changes being made to an existing trust, a new trust comes into existence, triggering CGT event E1.

CGT event E1 is triggered when a trust resettlement occurs, that is, when one trust estate has ended and another has replaced it.

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:

In your case, the proposed variations to the existing trust deed would be a valid amendment to the trust, not resulting in a termination of the trust, and will not result in the happening of CGT event E1.


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