| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1013072565759
Date of advice: 18 August 2016
Ruling
Subject: Capital gains tax event E1
Question 1
Will the proposed change in Appointor of the Trust cause capital gains tax event E1 under section 104-55 of the Income Tax Assessment Act 1997 to happen?
Answer
No
This ruling applies for the following period
Income year ended 30 June 2017
The scheme commences on
1 July 2016
Relevant facts and circumstances
The Trust was established by deed with Appointors.
The Trust proposes pursuant to a Deed of Resignation and Appointment of Appointor to change the Appointor.
The Trust deed contains a clause referring to changing the Appointor with written notice given to the Trustee.
The proposed change in Appointor is shown in the provided unexecuted Deed of Resignation and Appointment. When executed, it will be given to the Trustee as the written notice.
No changes to the Trust's beneficiaries and property will occur in changing the Appointor.
Relevant legislative provisions
Section 104-55 of the Income Tax Assessment Act 1997
Reasons for decision
The Trust requested a ruling on whether a proposed change in the appointor of the Trust would cause capital gains event (CGT) event E1 to occur.
CGT Event E1 happens if a trust is created over a CGT asset by declaration or settlement (section 104-55 of the Income Tax Assessment Act 1997 (ITAA 1997)).
Taxation Determination TD 2012/21 provides the ATO view on whether CGT event E1 in section 104-55 of the ITAA 1997 happens if the terms of a trust are changed pursuant to a valid exercise of a power contained within the trust's constituent document, or varied with the approval of a relevant court.
TD 2012/21, relevantly states:
24. Even though Clark and Commercial Nominees were decided in the context of whether changes in a continuing trust were sufficient to treat that trust as a different taxpayer for the purpose of applying relevant losses, the ATO accepts the principles set out in these cases have broader application. Relevantly, the principles established by those cases are also relevant to the question of the circumstances in which CGT event E1 or E2 may happen as a result of changes being made to the terms of an existing trust pursuant to a valid exercise of a power in the deed (including a power to amend). In light of those principles, the ATO accepts that a change in the terms of the trust pursuant to exercise of an existing power (including an amendment to the deed of a trust), or court approved variation, will not result in a termination of the trust and, therefore, subject to the observation in paragraph 27 below, will not result in CGT event E1 happening.
Changing an appointor of a trust does not constitute a resettlement of the trust provided the trust deed allows for the change such as a power for providing for succession of appointor.
In the Trust's case, it is proposed to change the appointor by Deed of Resignation and Appointment to serve as written notice by the current Appointor - pursuant to the terms of the Trust deed. The Trust deed provides for changing the appointor of the Trust.
Therefore as a result of the executed Deed of Resignation and Appointment, the Appointor will be changed without causing termination of the Trust and CGT event E1 will not happen.