Private ruling: CGT - trust resettlement
Date of advice: 2 March 2022
Published: May 2022
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the proposed amendments to the Trust Deed cause capital gains tax (CGT) events A1, E1 or E2 in section 104-10, 104-55 or section 104-60 of the Income Tax Assessment Act 1997 (ITAA 1997) to happen? | A1: No. As per the note to section 104-10(2) of the ITAA 1997 CGT event A1 will not happen merely because of a change in trustee. The proposed amendments are considered within the powers of the Trustee as contained in the Trust Deed and therefore, will not cause CGT event E1 or E2 in section 104-55 or section 104-60 of the ITAA 1997 to happen. This private ruling applies for the following period: Year ending 30 June 20XX

Relevant facts and circumstances: The Trust is a discretionary trust. A company (the Trustee) is the trustee of the trust. The Trustee is incorporated in Australia and only acts in the capacity of trustee of the Trust. Individual A is director, secretary, and sole shareholder of the Trustee. Individual A is an Australian resident for Australian tax purposes. The Trustee is an Australian resident for Australian tax purposes. Under the Trust Deed, clause 1.23 defines Primary Beneficiaries as the persons named or described as such in item 6 of the Schedule, which is Individual A and their children and remoter issue. Individua A's spouse is currently Individual B. However they are separated and are proposing to enter into a matrimonial settlement. Together, Individual A and B have children. Under item 8 of the Schedule to the Trust Deed, Individual A is the Appointer of the Trust, and upon their death, Individual A's legal representative will become Appointer of the Trust. As a result of the matrimonial settlement, it is proposed that Individual B becomes the Appointer and a Primary Beneficiary of the Trust and the Trustee is changed. To that end, it is proposed that the following amendments are made to the Trust Deed (collectively referred to as the Proposed Amendments): • Under item 6 of the Schedule to the Trust Deed, the reference to Individual A in the definition of Primary Beneficiary will be replaced with a reference to Individual B such that the definition refer to Individual B and their children and remoter issue; • Under item 8 of the Schedule to the Trust Deed, Individual A will be removed as the Appointer, and Individual B will become the sole Appointer; and • The Trustee will be removed, and a new company of which Individual B is sole shareholder and director will be appointed as the trustee Further to the above, clause 18.3 of the Trust Deed provides that an Appointer shall have the power to appoint another person or persons, and under clause 18.4 of the Trust Deed, an Appointer may resign by notice in writing to the Trustee. IT is proposed that the Appointer appoints Individual B as appointer and Individual A resigns as appointer by written notice to the Trustee. Clause 17.1 of the Trust Deed also specifically permits the Trustee to resign by given written notice to the Appointer. Clause 17.3 of the Trust Deed also provides that the Appointer may remove a Trustee from office and/or that a new trustee may then be appointed by the Appointer. It is proposed that the Appointer exercises its power under clause 17.3 of the Trustee Deed to remove the company as the trustee of the Trust and to appoint a company which Individual B owns and controls as trustee of the Trust. All existing assets of the Trust will remain assets of the Trust and there will be no change of ownership of assets as part of the proposal to amend the Trust Deed.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 104-55 | Income Tax Assessment Act 1997 section 104-60