Edited version of private advice

Authorisation Number: 1052358208725

Date of advice: 06 February 2025

Ruling

Subject: Trust deed amendments and capital gains tax

Question 1

Will the amendments to the Trust Deed cause any capital gains tax (CGT) event?

Answer 1

No.

As the Trust Deed will be amended through a valid exercise of the Trustee's power, the amendments will not cause the existing trust to terminate and a new trust to arise, nor will the variation lead to any particular asset being subject to a separate charter of rights and obligations, no CGT events will occur, including CGT events E1 or E2.

This decision is consistent with 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?

Taxation determinations are public rulings for the purposes of the Taxation Administration Act 1953. If you rely on the ruling and act in accordance with the ruling, you will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you.

Question 2

Will the amendments to the Trust Deed result in any change to the cost base of the currently issued units?

Answer 2

No.

As the Trust will not be resettled, upon exercise of the proposed amendments, there will be no changes to the cost base of the currently issued units.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The Trustee and the Unit Holders executed a deed (the Trust Deed) establishing the Trust.

Units were allotted to the Unit Holders on establishment.

The Trustee proposes to amend the Trust Deed in order for the Trust to satisfy the definition of a fixed unit trust in the relevant State Act.

The Trust Deed provides:

"The Trustee may, at any time and from time to time, by supplemental deed revoke, add to or vary all or any of the trusts, powers or discretions declared by any revocation, addition or variation made thereto from time to time, with the consent of not less than 75% (seventy five percent) of the Unit Holders at such time."

All the Unit Holders will approve the variation by signing a Deed of Variation.

The Trustee will amend the Trust Deed by:

(a)          Deleting a rule which states:

"Without limiting other Rules of the Deed, the Trustee has absolute discretion to determine the "Income of the Trust"

a)            In accordance with Australian Accounting Standards.";

(b)          Inserting the following rule:

"For absolute certainty, the purpose of this rule is to ensure that the Deed contains the relevant criteria contained in (the relevant State Act) and this provision applies in priority to all other provisions in this Deed, and notwithstanding anything to the contrary:

a)            all Unit Holders are presently entitled to the income of the Trust, subject only to the payment of proper expenses by and of the Trustee relating to the administration of the Trust;

b)            all Unitholders are presently entitled to the capital of the Trust and may require the Trustee to wind up the Trust and distribute the Trust Property or the net proceeds of the Trust Property;

c)            the entitlements referred to in subrules a) and b) cannot be removed, restricted or otherwise affected by the exercise of any discretion or by a failure to exercise any discretion, conferred on a person by this Deed;

d)            the proportion of Trust capital to which a Unit Holder is entitled on a winding up or surrender of Units is fixed and must be the same as the proportion of income of the Trust to which the Unit Holder is entitled;

e)            only one class of units may be on issue or issued in the Trust; and

f)             subrules d) and e) cannot be amended."

The Deed of Variation provides:

"Any provision of this Deed that is invalid, unenforceable, illegal or would cause a resettlement of the Trust must be read down to the extent necessary to avoid that effect. If that is not possible, that provision must be excluded from this Deed but only to the extent necessary to avoid that effect. All other provisions of this Deed continue to be valid and enforceable."

The amendments to the trust deed do not affect the assets of the Trust, nor do they cause the Trust to vest or resettle.

No assets of the Trust will be transferred.

The Deed of Variation does not contain any provisions that will affect the cost base of the already issued units of the Trust.

Relevant legislative provisions

Income Tax Assessment Act 1997 subdivision 104-E

Income Tax Assessment Act 1997 section 104-55

Income Tax Assessment Act 1997 section 104-60