Private ruling: Capital Gains Tax - Trust Resettlement
Published: May 2015
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will amending The Trust deed trigger CGT event E1? | A1: No. | Q2: Will changing The Trust principal trigger CGT event E1? | A2: No.

Relevant facts and circumstances: The Trust was established in 19XX. A was the principal of the trust. A passed away and as per the terms of the trust deed, B became the principal of the trust. The trust deed is silent in relation to changing the principal. The trust deed allows the trustee to amend the deed. The amendment is intended to allow for the retirement of the B.

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.