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Edited version of private advice
Authorisation Number: 1051921648798
Date of advice: 12 November 2021
Ruling
Subject: Beneficiary absolutely entitled to Trust assets
Question 1
Is the beneficiary absolutely entitled, as against the trustee, to the assets of that Trust for the purposes of section 106-50 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
The beneficiary has a vested, indefeasible and absolute interest in settled funds derived from the entitlement to damages for personal injuries. The assets of the Trust are held exclusively for the benefit of the beneficiary. No other beneficiary has rights or ability to call on the assets of the Trust. Consequently, the sole beneficiary is absolutely entitled to the assets of the Trust.
Question 2
Will CGT event A1 under section 104-10 of the ITAA 1997 be triggered when the CGT assets are transferred to the beneficiary?
Answer
No.
The beneficiary is absolutely entitled to the Trust assets as against the trustee. Therefore, the beneficiary is the relevant taxpayer if a CGT event happens to the assets. As the beneficiary is absolutely entitled, a transfer of the Trust assets to the beneficiary does not result in a change in beneficial ownership. Therefore, CGT event A1 in subsection 104-10(1) of the ITAA 1997 will not occur for the trustee upon transferring the Trust assets to the beneficiary.
This private ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The beneficiary is the sole beneficiary of the Trust.
The beneficiary suffers from a medical condition.
The beneficiary was awarded compensation for the medical condition.
The beneficiary did not have financial capacity, so an order was made for the Trust to hold and manage the funds received from the compensation.
A Court order removed the trustee and appointed a Financial Manager under relevant state legislation.
Subject to continuing as the Financial Manager, the Financial Manager is considering vesting the trust assets in the beneficiary.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 106-50