Private ruling: Trust Resettlement
Date of advice: 27 July 2015
Published: July 2015
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Will a CGT event arise upon the extension of the vesting date of the Trust? | A1: No.

Relevant facts and circumstances: The Trust was created by the will of the deceased who passed away on the XXXX. The will provided the trust would vest X years after the death of the deceased. The will provides that the terms of the trust may be varied by agreement between the relatives of the deceased. The relatives have agreed that they wish to extend the vesting date to XXXX.

Relevant legislative provisions: Section 104-55 of the Income Tax Assessment Act 1997

Reasons for decision: Summary: A trust resettlement will occur for income tax purposes where one trust estate has ended and another has replaced it. The effect of such a resettlement is that a disposal of the trust assets is deemed to occur. In consequence, capital gains could accrue to beneficiaries as a result of various CGT events. Commissioner has recently released Taxation Determination TD 2012/D4 which was published as a result of a recent court case CoT v Clark [2011] FCAFC 5; 2011 ATC 20-236; (2011) 79 ATR 550 (Clark's case). Whilst the case of Clark's case dealt with whether changes in a continuing trust were sufficient to treat that trust as a different taxpayer for the purpose of applying relevant losses, TD 2012/D4 accepts that the principles set out in Clark's case have broader application. TD 2012/D4 asserts that a valid amendment to a trust pursuant to an existing power will not result in termination of the trust and therefore will not result in CGT event E1 happening. Following the direction set out in TD 2012/21, as the Trust Deed allows for the Trustee to amend the deed, CGT event E1 or E2 does not arise in relation to the changes proposed. Accordingly, there is no tax liable as a result of the change to the trust deed.