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Edited version of your written advice
Authorisation Number: 1012973764540
Date of advice: 23 February 2016
Ruling
Subject: Whether a CGT event will occur as a result of the variation of the Deed of Settlement
Question
Do the proposed amendments of the Trust Deed cause either CGT event E1 or CGT event E2 to happen?
Answer
No
This ruling applies for the following period
Year ending 30 June 2016
The scheme commences on
1 July 2015
Relevant facts and circumstances
The trust was established by Deed of Settlement (deed).
A Clause of the deed vests the trustee with the express power to vary the terms of the deed.
The trustee intends to vary various clauses contained within the deed.
Relevant legislative provisions
Section 104-55 of the Income Tax Assessment Act 1997
Section 104-60 of the Income Tax Assessment Act 1997
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 as a result of various CGT events.
The Commissioner has released Taxation Determination TD 2012/21 which was published as a result of the court case CoT v. Clark [2011] FCAFC 5; 2011 ATC 20-236; (2011) 79 ATR 550 (Clark's case). Whilst Clark's case dealt with whether changes in a continuing trust were sufficient to treat that trust as a different taxpayer for the purpose of applying relevant losses, TD 2012/21 accepts that the principles set out in Clark's case have broader application.
TD 2012/21 asserts that a valid amendment to a trust pursuant to an existing power will not result in termination of the trust and therefore will not result in CGT event E1 or CGT event E2 happening.
Following the direction set out in TD 2012/21, as the Trust Deed allows for the Trustee to amend the deed, neither CGT event E1 nor CGT event E2 arises in relation to the changes proposed. Accordingly, there is no tax liable as a result of the change to the trust deed.
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