Edited version of private advice

Authorisation Number: 7925136543279

Date of advice: 4 May 2021

Ruling

Subject: Trust - resettlement

Question 1: If an application is made by the Trustee to the Court seeking an order that the vesting date for the Trusts be extended to the maximum period allowed and the court approved this variation, will this cause the creation of a new trust giving rise to CGT event E1?

Answer: No. The proposed extension to the vesting date of the Trusts, if approved by the Court, will not extinguish the continuity of the trust property or corpus. Nor will it result in any particular asset being subject to a separate character of rights/obligations.

Therefore, the proposed extension of the vesting date will not result in the resettlement of the Trusts and a CGT event E1 under section 104-55 of the Income Tax Assessment Act 1997 (ITAA 1997) will not occur in accordance with the principles contained in Taxation Determination TD 2012/21.

Question 2: If an application is made by the Trustee to the Court seeking an order that the Trusts be varied so that the condition on which the specified parties become default beneficiaries is changed, and the court approved this variation, will this cause the creation of a new trust giving rise to CGT event E1?

Answer: No. The proposed changes to the Trusts to include the default beneficiaries will not extinguish the continuity of the trust property or corpus and will not result in any particular asset being subject to a separate character of rights/obligations.

Therefore, the proposed addition of the default beneficiaries will not result in the resettlement of the Trusts and a CGT event E1 under section 104-55 of the ITAA 1997 will not occur in accordance with the principles contained in TD 2012/21.

Question 3: If an application is made by the Trustee to the Court seeking an order that the Trusts be varied to include further bloodline beneficiaries, and the court approved this variation, will this cause the creation of a new trust giving rise to CGT event E1?

Answer: No. The proposed variation to include additional beneficiaries of the Trusts will not result in the resettlement of the Trusts and a CGT event E1 under section 104-55 of the ITAA 1997 will not occur in accordance with the principles contained in TD 2012/12.

This ruling applies for the following period:

Income year ending 30 June 2020.

Income year ending 30 June 2021

Income year ending 30 June 2022

Income year ending 30 June 2023

Income year ending 30 June 2024

The scheme commences on:

1 July 2019.

Relevant facts and circumstances

Prior to 20 September 1985, Person A purchased a property (the Property).

Following the purchase of the Property, a Schedule of Trusts was stamped by the Stamp Duties Office and lodged at the Titles Office that stated Person A held the Property on trust for themselves and their children as tenants in common in equal shares as follows:

•         Person B

•         Person C

•         Person D and

•         Person A, to be held by their sole use and benefit absolutely.

Trusts were established for Persons B, C and D in the same month the Property was purchased.

A trust was established for another of Person A's children, being Person E, several years after the Property was purchased.

A Nomination of Trustees was lodged with the Stamp Duties Office which included the following information:

•         Person A is the registered proprietor as Trustee under the Nomination of Trustees to the Property; and

•         A Schedule of Trusts was prepared which outlined that the land as provided in the Nomination of Trusts above would be held on trust by Person A in equal shares in the following trusts as tenants in common:

-        Person B Trust

-        Person C Trust

-        Person D Trust

-        Person E Trust; and

-        Person A Trust, for their sole use and benefit.

The children's trust deeds provided that:

•         If they were married when they passed, their surviving child/children would be entitled to equal shares

•         If they were unmarried when they passed, their surviving siblings would be entitled to equal shares; and

•         In either case the trust would continue until the youngest child/children, or the youngest of the siblings, reached the specified age.

A trust was established for Person A, with Person A being the primary beneficiary on the same date that the Nomination of Trustees had been stamped by the Stamp Duties Office.

The trust deed for the Person A Trust has not be able to be located.

The trusts for Person A's children (the children's trusts) and the Person A Trust are referred to collectively as 'the Trusts'.

After a short period, Person A signed a Nomination of Trustees declaring that they held the Property for the Trusts as tenants in common, but this document has not been able to be located.

Person A was the initial trustee of the Trusts. Company X (the Trustee) replaced Person A as trustee in relation to the children's trusts many years after 20 September 1985. Company X also replaced Person A as the trustee in relation to the Person A Trust during the following year.

Person A lodged documents with the Titles Office to reflect the change of trustee of the Trusts from themselves to Company X.

The Trusts only other asset is cash.

Rectification and change of trustee deeds for the children's trusts were signed which outlined that the deed was not intended to vary the rights, interests or entitlements of any default income or capital beneficiary in a manner that would constitute a resettlement of the Trusts.

At the same time, a rectification and change of the trustee deed for the Person A Trust was signed which outlined that the deed was not intended to vary the rights, interests or entitlements of any default income or capital beneficiary in a manner that would constitute a resettlement of the Trusts.

The anticipated perpetuity dates for the children's trusts has not passed at this time.

Proposed amendment of trust deeds

Company X, as the Trustee, proposes varying the Trusts' deeds so that:

•         The vesting date of each trust will be extended to the maximum permitted perpetuity period under the relevant state law

•         If the children die without being married, their children become the beneficiaries of their parent's trust (instead of other siblings); and

•         Further bloodline beneficiaries (for example, great grandchildren) are included as

•         beneficiaries of each trust.

A draft deed of variation has been prepared for the trust deed for the Person B Trust which includes the following in the event of Person B's death:

•         Any surviving child/children of Person B will be entitled to equal shares

•         If any surviving child/children have predeceased Person B, their child/children will be entitled to equal shares.

Variations to the remaining trusts will be prepared and executed in line with the amendments draft deed of variation for the Person B Trust outlined above (except for the Person A Trust, which will not include an amendment clause in relation to any child predeceasing them)

Company X, as the Trustee, proposes to lodge an application with the Court for an order approving the proposed variations.

Assumptions

The Person A Trust was established prior to 20 September 1985, and the terms of the Person A Trust Deed are identical to the other Trusts (with the exception of the clause in relation to any child predeceasing Person A, which is excluded from the Person A Trust Deed), and the Trustee will seek orders from the Supreme Court of Queensland confirming same.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-55

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