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Edited version of your written advice
Authorisation Number: 1013115884911
Date of advice: 8 November 2016
Ruling
Subject: Resettlement of Trust
Question
Will the proposed changes to the Trust Deed result in the creation of a new trust and will CGT event E1 or E2 occur?
Answer
No.
This ruling applies for the following periods:
Year ending 30 June 20YY
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The terms of the Trust gives the power to the trustee to amend the terms of the Trust with the consent of the guardian.
It is proposed to make a variation to the Primary Beneficiaries under the power contained in the deed.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-55
Income Tax Assessment Act 1997 Section 104-60
Reasons for decision
CGT event E1 arises in accordance with section 104-55 of the ITAA 1997 due to a trust being created over a CGT asset. This event will also be triggered if changes made to a trust alter the nature and character of the trust relationship such that the original trust ceases to exist and a new trust is created.
CGT event E2 arises in accordance with section 104-60 of the ITAA 1997 as a CGT asset is transferred to a new trust. Where this event occurs as a result of a trust resettlement, the assets are considered to be transferred from the original trust to the new trust.
Taxation 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 CGT event E1 or E2 occurring provided:
• 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 this 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 or E2.
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