Edited version of private advice

Authorisation Number: 1051599409338

Date of advice: 24 October 2019

Ruling

Subject: CGT - discount capital gain

Question

Did you acquire the capital gains tax (CGT) asset being the right to be considered by the Trustees of the Trust more than twelve months before the CGT event A1 disposal of that interest?

Answer

Yes.

After reviewing the facts and circumstances, the Commissioner considers that you have held that interest for more than twelve months and the provisions of section 115-25 of the Income Tax Assessment Act 1997 (ITAA 1997) have been met. More information about discount capital gains can be found by searching for "QC 17159" on ato.gov.au

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Trust was settled on 20XX.

A clause of the Deed creating the Trust defines the income beneficiaries as:

income beneficiaries are the persons to whom the net income of the trust Fund in terms of the discretionary powers vested in the Trustees may be distributed and who shall be selected by the Trustees in their discretion from amongst the members of the class consisting of Person A, Person B, Person C and Person D and their lawful issue, including children and grandchildren, or any Trust or family holding company established for the benefit directly or indirectly of all or any of the aforegoing and any associations of religious, educational or charitable nature selected by the Trustees;

A clause of the Deed defines the capital beneficiaries as:

Capital beneficiaries are the persons to whom the Trust Capital will be distributed and may include those persons selected by the Trustees in their discretion from among the class consisting of Person A, Person B, Person C and Person D and their lawful issue, including children and grandchildren, or any Trust or family holding company established for the benefit directly or indirectly of all or any of the said issue, spouse or widows of the aforegoing;

In a resolution that the Trust Deed be amended to give effect to:

·        Your resignation as a Trustee;

·        Person C to be appointed as a Trustee;

·        Person E be appointed as an independent Trustee;

·        The amendments in "Annexure A".

The Company was defined a clause of Annexure A.

The Company was added to the class of beneficiaries capable of being distributed to under a clause of Annexure A.

You were removed from the class of Beneficiaries entitled to be distributed to under a clause of Annexure A.

A Memorandum of Agreement (the Memo) between you and others, and the Company and the Trustees was entered into.

The Memo defines "the SELLERS" as you and others.

The Memo defines "the PURCHASERS" as the Company.

The Memo provides that the Sellers sell to the Purchasers their rights to be considered by the Trustees of the Trust a sum.

The Memo made the sale conditional upon the approval of the Court being attained. This endorsement was attained.

You did not have a vested and indefeasible interest in the income or capital of the Trust prior to the Memo being entered into.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 106-50

Income Tax Assessment Act 1997 section 108-5

Income Tax Assessment Act 1997 section 109-5

Income Tax Assessment Act 1997 section 115-25