| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012991937365
Date of advice: 1 April 2016
Ruling
Subject: Whether a CGT event will occur as a result of a change in trustees
Question
Will either CGT event A1 or E2 happen if the legal titles of the shares are transferred from the individuals as trustees for the trust to a new corporate trustee, given that the beneficiaries and the terms of the trust will not change?
Answer
No
This ruling applies for the following period
Year ending 30 June 2016
The scheme commenced on
1 July 2015
Relevant facts and circumstances
The trust was established and individual trustees were appointed.
The trustees own shares on behalf of the trust.
The trustees intend to incorporate a company (corporate trustee) for the sole purpose of taking over as trustee of the trust.
The individual trustees will be directors of the proposed corporate trustee.
It is intended that the ownership of the shares will be transferred from the trustees to the corporate trustee.
The beneficiaries and the terms of the trust will remain the same.
Relevant legislative provisions
Subsection 104-10(2) of the Income Tax Assessment Act 1997
Subsection 104-60(1) of the Income Tax Assessment Act 1997
Reasons for decision
Subdivision 104-A of the Income Tax Assessment Act 1997 (ITAA 1997) discusses disposals of CGT assets.
Subsection 104-10(2) of the ITAA 1997 states you dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner.
A note to this subsection in part states a change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust. This means that CGT event A1 will not happen merely because of a change in the trustee.
Subsection 104-60(1) of the ITAA 1997 states CGT event E2 happens if you transfer a CGT asset to an existing trust. A note to the subsection in part states a change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust. This means that CGT event E2 will not happen merely because of a change in the trustee.
In this case the individual trustees of the trust intend to transfer legal ownership of the shares owned by the trust to a new corporate trustee, of which the individuals will be the directors. As there is merely a change in trustee neither CGT event A1 nor E2 will occur.