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Edited version of your private ruling
Authorisation Number: 1012484865118
Ruling
Subject: Trust resettlement
Question 1
Will a change of trustee to the Trust in the financial year ended 30 June 2014 constitute a trust resettlement such that any carried forward losses of a prior year are no longer available to be recouped against future income?
Answer
No.
This ruling applies for the following periods:
Financial year ended 30 June 2014.
The scheme commences on:
1 July 2013.
Relevant facts and circumstances
The appointor of the Trust is seriously contemplating removing the trustee and appointing a new trustee via written declaration and in accordance with the Trust's constituent documentation.
The Trust deed provides the appointor the power to remove the trustee and to appoint a new trustee via written declaration at any time.
With the exception of the change in trustee, there are no other changes to the Trust being seriously contemplated including any changes to one or more of the trust's constituent documents, the trust property, and the beneficiaries.
Relevant legislative provisions
Income Tax Assessment Act 1936 Schedule 2F.
Reasons for decision
Tax Determination TD 2012/21 provides the Commissioner of Taxation's view of when a new trust may or may not arise for tax purposes following the decision in Federal Commissioner of Taxation v. Clark and Anor [2011] FCAFC 5 (Clark).
Clark highlighted circumstances in which it may be concluded, for income tax purposes, that the nature of a trust has fundamentally changed such that the trust that originally incurred losses is not the same trust as that which has derived gains against which losses are sought to be recouped.
Paragraph 20 of TD 2012/21 provides the Commissioner's view that, in the absence of the termination of a trust, tax losses being carried forward will generally remain available to be recouped against relevant trust income derived in future years.
The Commissioner also considers that the decision in Clark does not change the basic proposition that, based on the authority in Federal Commissioner of Taxation v. Commercial Nominees of Australia Ltd [1999] FCA 1455, the relevant test to be applied looks to whether changes to one or more of the trust's constituent documents, the trust property, and the identity of those with a beneficial interest in the trust property are such as to terminate the existence of the trust.
In your case, the appointor of the Trust is seriously contemplating removing the trustee and appointing a new trustee via written declaration and in accordance with the Trust's constituent documentation.
You have stated that changes to the trust deed and other constituent documents, the trust property, and the beneficiaries are not being contemplated as you are only seriously contemplating a change in trustee.
The Trust deed provides the appointor the power to remove the trustee and to appoint a new trustee via written declaration at any time.
We consider that the change of trustee as described, will be a valid change to the Trust as the Trust's constituent documents both contemplate and allow for such an event. Accordingly, this will not result in a termination of the trust provided this is the only change to the Trust, as a mere change in trustee in these circumstances will have no impact on the continuity of the trust.
Therefore, tax losses being carried forward will remain available to be recouped against relevant trust income derived in future years subject to the trust loss tests in Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936).
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