Private ruling: Trust resettlement
Date of advice: 9 March 2016
Published: April 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Do the proposed amendments to the trust deed cause a CGT event, including CGT event E1 or E2, to happen? | A1: No.

Relevant facts and circumstances: The trustee and unitholders wish to amend the unit trust deed in order to satisfy the criteria of a "fixed trust" under state legislation. No assets are being transferred. The state OSR has confirmed by private ruling that no stamp duty is payable on the proposed amendments. The amendment clause of the trust deed states: At any time prior to termination of this deed, any provision, condition or term of this deed may be varied by the trustee, except clause 88 (which cannot be varied), by the following means: • By execution of a deed of variation; or • By a resolution of the board of directors of the corporate trustee of the trust

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-55. | Income Tax Assessment Act 1997 Section 104-60.

Reasons for decision: Summary: Capital gains tax (CGT) event E1 is triggered when a trust resettlement occurs, that is, when one trust estate has ended and another has replaced it. Tax Determination TD 2012/21 sets out the Commissioner's view in respect to trust resettlements and whether or not a resettlement has occurred. TD 2012/21 asserts that a valid amendment to a trust will not result in the termination of a trust as long as: • the amendment is made pursuant to an existing power; • the amendment does not cause the trust to terminate for trust law purposes; and • the effect of the amendment does not lead to a particular asset being subject to a separate charter of rights and obligations such as to give rise to the conclusion that that asset has been settled on terms of a different trust. In your case, the proposed variations to the existing trust deed would be a valid amendment to the trust, not resulting in a termination of the trust or the creation of a different trust, and will not result in the happening of CGT event E1 or E2. There are no other CGT consequences relating to the variation of the trust deed.