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Edited version of private advice
Authorisation Number: 1012653442461
Ruling
Subject: CGT - trust resettlement
Question
Will the changes to the Trust proposed by the Amending Deed result in the creation of a new trust, triggering capital gains tax (CGT) event E1?
Answer
No
This ruling applies for the following period:
Year ending 30 June 2015
The scheme commenced on:
1 July 2014
Relevant facts and circumstances
The Trust was established by deed.
The trust deed provides the trustee with the power to amend the deed.
It is proposed to insert a new clause into the trust deed.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-55
Reasons for decision
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 2012/21 sets out the Commissioner's view in respect to trust resettlements and whether or not a resettlement has occurred.
TD 2012/21 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.
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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