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Edited version of private advice
Authorisation Number: 1052085411405
Date of advice: 17 February 2023
Ruling
Subject: Amendments to trust deed
Question 1
Will the amendment to the "Secondary Beneficiary" list of the trust deed result in the termination of the Trust and/or the creation of a new trust for income purposes and the application of CGT event E1 (s104-55) or CGT event E2 (s104-60) as per the Income Tax Assessment Act 1997?
Answer
No.
Question 2
Will the amendment to the "Specified Beneficiary" list of the trust deed result in the termination of the Trust and/or the creation of a new trust for income purposes and the application of CGT event E1 (s104-55) or CGT event E2 (s104-60) as per the Income Tax Assessment Act 1997?
Answer
No.
Question 3
Will the amendment to remove some future potential beneficiaries from the trust deed result in the termination of the Trust and/or the creation of a new trust for income purposes and the application of CGT event E1 (s104-55) or CGT event E2 (s104-60) as per the Income Tax Assessment Act 1997?
Answer
No.
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
The Trust is a discretionary trust with a corporate trustee.
The Trustee proposes to amend the trust deed (Proposed Amendments) to vary the beneficiaries in accordance with its powers under the trust deed.
No other changes are made to the trust deed as part of the Proposed Amendments.
Assumptions
• The Trustee has the power to amend the clauses of the Trust Deed under the Trust Deed;
• The Proposed Amendments are within the amendment powers of the Trust Deed and do not enliven any restrictions or limitations on the power of amendment under the Trust Deed.
Relevant legislative provisions
Section 104-55 of the Income Tax Assessment Act 1997
Section 104-60 of the Income Tax Assessment Act 1997
Reasons for decision
Question 1
Summary
The amendment will not give rise to CGT event E1 or E2.
Detailed reasoning
CGT event E1 under section 104-55 of the Income Tax Assessment Act 1997 (ITAA 1997) arises when a trust is created over a CGT asset, while CGT event E2 under section 104-60 is triggered when a CGT asset is transferred to an existing trust.
Taxation Determination TD 2012/21 Income tax: does CGT event E1 or E2 in sections 104-55 or 104-60 of the Income Tax Assessment Act 1997 happen 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) provides the Commissioners view on when CGT event E1 or E2 may apply when amendments are made to a trust.
Taxation Determination TD 2019/14 Income tax: will a trust split arrangement of the type described in this Determination cause a new trust to be settled over some but not all assets of the original trust with the result that CGT event E1 in subsection 104-55(1) of the Income Tax Assessment Act 1997 happens? (TD 2019/14) provides the Commissioners view on when CGT event E1 would apply to transferred assets in a trust splitting arrangement. Provided the amendment to the trust deed is pursuant to a valid exercise of power or varied with the approval of a relevant court, and the changes do not cause an existing trust to terminate and a new trust to arise for trust law purposes, or the effect of the change does not lead to a particular asset being subject to a separate charter of rights or obligations, CGT event E1 or E2 will not apply.
Therefore, the proposed amendments you have outlined will not give rise to CGT event E1 or E2.
Question 2
Summary
The amendment will not give rise to CGT event E1 or E2.
Detailed reasoning
Pursuant to the reasoning in question 1 and in accordance with the assumptions, the amendment will not give rise to CGT event E1 or E2.
Question 3
Summary
The amendment will not give rise to CGT event E1 or E2.
Detailed reasoning
Pursuant to the reasoning in question 1 and in accordance with the assumptions, the amendment will not give rise to CGT event E1 or E2.