Private ruling: Whether a CGT event will occur
Date of advice: 14 March 2016
Published: May 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Will a CGT event happen if the legal titles of the trust assets are transferred from a trustee to a new trustee? | A1: No.

Relevant facts and circumstances: The trust was set up many years ago and a person was appointed as trustee. The trust purchased assets. It was decided to change the trustee to a corporate trustee and transfer legal title of the assets to the new trustee.

Relevant legislative provisions: Subsection 104-10(1) of the Income Tax Assessment Act 1997 | Subsection 104-10(2) of the Income Tax Assessment Act 1997 | Subsection 104-55(1) of the Income Tax Assessment Act 1997 | Subsection 104-60(1) of the Income Tax Assessment Act 1997

Reasons for decision: Summary: A comprehensive capital gains tax (CGT) regime generally applies to CGT events that happen to CGT assets acquired after 19 September 1985. For CGT to apply there must be a CGT event. Division 104 contains CGT events. | Detailed Reasoning - Disposals: Subdivision 104-A discusses disposals. Subsection 104-10(1) of the ITAA 1997 states CGT event A1 happens if you dispose of a CGT asset. Subsection 104-10(2) of the ITAA 1997 states you dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner. | Detailed Reasoning - Trusts: Subdivision 104-E specifically discusses CGT events and trusts. Subsection 104-55(1) of the ITAA 1997 states CGT event E1 happens if you create a trust over a CGT asset by declaration or settlement. Subsection 104-60(1) of the ITAA 1997 states CGT event E2 happens if you transfer a CGT asset to an existing trust. A change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust. This means that CGT events A1, E1 or E2 will not happen merely because of a change in the trustee. In this case a person was the trustee of the trust. The trust purchased assets. The trustee resigned as trustee. As a result of the resignation the legal ownership of the assets is to be transferred from the old trustee to the new trustee of the trust. As there has merely been a change in the trustee no CGT event has occurred.