Private ruling: Amendments of trust deed
Date of advice: 7 November 2019
Published: January 2020
Ruling period: 1 July 2019 - 30 June 2020
Date scheme commenced: 1 July 2019

Ruling: Q1: Will the proposed amendments to the trust deed of the Family Trust result in capital gains tax (CGT) event E1 in section 104-55 or CGT event E2 in section 104-60 of the Income Tax Assessment Act 1997 (ITAA 1997) ? | A1: No | Q2: Will the proposed amendments to the trust deed of the Family Trust result in CGT event A1 in section 104-10 or any other CGT event in Subdivision 104-E of the ITAA 1997? | A2: No

Relevant facts and circumstances: Family Trust was settled for the benefit of individual A and the children. The trustee for Family Trust is Family Trust Pty Limited (Trustee). Individual A is the director and shareholder of the Trustee. The Trust Deed confers on the Trustee powers to make amendments to the Trust Deed subject to consent of Individual A. The Trustee proposes to amend the Trust Deed to remove one of the children who no longer resides in Australia, to define 'Beneficiary' to exclude any 'foreign person' as defined in the Duties Act 1997 (NSW) and the Land Tax Act 1956 (NSW), and to make other amendments concerning the roles of the Appointor. Individual A will provide consent for the proposed amendments to be made.

Relevant legislative provisions: Section 104-10 of the Income Tax Assessment Act 1997 | Section 104-55 of the Income Tax Assessment Act 1997 | Section 104-60 of the Income Tax Assessment Act 1997 | Section 104-65 of the Income Tax Assessment Act 1997 | Section 104-70 of the Income Tax Assessment Act 1997 | Section 104-75 of the Income Tax Assessment Act 1997 | Section 104-80 of the Income Tax Assessment Act 1997 | Section 104-85 of the Income Tax Assessment Act 1997 | Section 104-90 of the Income Tax Assessment Act 1997 | Section 104-105 of the Income Tax Assessment Act 1997 | Section 104-107A of the Income Tax Assessment Act 1997

Reasons for decision: Summary: CGT event E1 happens when a trust is created over a CGT asset by declaration or settlement (subsection 104-55(1) of the ITAA 1997). CGT event E2 happens if a CGT asset is transferred to an existing trust (subsection 104-60(1) of the ITAA 1997). The proposed amendments to the Trust Deed will not cause the Trust to end or give rise to a particular asset of the Trust being settled on terms of a different trust. The proposed amendments are able to be validly made pursuant to the power of amendment vested in the Trustee and therefore, will not cause CGT event E1 or E2 in section 104-55 or 104-60 of the ITAA 1997 to happen. CGT event A1 happens when a CGT asset is disposed of (subsection 104-10(1) of the ITAA 1997). For the same reasons as stated above, the Trustee has not disposed of a CGT asset and therefore, CGT event A1 has no application | Detailed Reasoning - Other CGT events in Subdivision 104-E of the ITAA 1997: CGT event E3 happens if a trust over a CGT asset is converted to a unit trust and, just before the conversion, a beneficiary under the trust was absolutely entitled to the asset as against the trustee (subsection 104-65(1) of the ITAA 1997). Subject to certain exceptions, CGT event E4 happens where the trustee of a trust makes a payment to a taxpayer in respect of the taxpayer ' s unit or interest in the trust, and some or all of the payment is not included in the taxpayer ' s assessable income (subsection 104-70(1) of the ITAA 1997). CGT event E5 happens if a beneficiary of a trust becomes absolutely entitled to an asset of the trust as against the trustee of the trust (subsection 104-75(1) of the ITAA 1997). CGT event E6 happens if the trustee of a trust disposes of a CGT asset of the trust to a beneficiary so as to satisfy the beneficiary's right to receive ordinary income or statutory income from the trust (subsection 104-80(1) of the ITAA 1997). CGT event E7 happens if the trustee of a trust disposes of a CGT asset of the trust to a beneficiary so as to satisfy the beneficiary's interest in the capital of the trust (subsection 104-85(1) of the ITAA 1997). CGT event E8 happens if the beneficiary of a trust disposes of the beneficiary's interest in the capital of the trust, or a part of that interest, to a person who is not the trustee of the trust andthe beneficiary did not give any money or property to acquire the interest and did not acquire the interest by way of assignment (subsection 104-90(1) of the ITAA 1997). CGT event E9 happens if a taxpayer agrees for consideration that, when property comes into existence, the taxpayer will hold it on trust. However, CGT event E9 only happens if, at the time of the agreement, no potential beneficiary under the trust has a beneficial interest in the rights created by the agreement (subsection 104-105(1) of the ITAA 1997). CGT event E 10 relates to units or interests in attribution managed investment trusts (section 104-107A of the ITAA 1997). Conclusion: CGT events E3 to E10 of Subdivision 104-E of the ITAA 1997 have no application.