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Edited version of your private ruling
Authorisation Number: 1012593846527
Ruling
Subject: Trust resettlement
Question
Will an amendment to the vesting date of the trust trigger capital gains tax (CGT) event E1?
Answer
No.
This ruling applies for the following period
Year ending 30 June 2014
The scheme commences on:
1 July 2013
Relevant facts and circumstances
The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:
· the application for private ruling dated, and
· the Trust Deed.
The trust is a discretionary family trust which owns cash and property predominantly.
The Trustee may distribute income and capital of the Trust at any time prior to the expiration of any year to the beneficiaries in such proportions as the Trustee determines.
Upon termination and vesting, the Trustee must distribute the Trust Fund to the beneficiaries in such proportions as the Trustee determines or in accordance with the Trust Deed.
The Trustee has wide powers to vary the Trust provided that such variation does not infringe the law against perpetuities, favour the settlor or affect the beneficiaries existing entitlements.
The Trust Deed confers an express power on the Trustee to amend the vesting date of the trust.
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.
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 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 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.