Private ruling: Trust resettlement
Published: February 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Would the removal of a beneficiary from the trust deed constitute a resettlement of the trust for CGT purposes? | A1: No | Q2: Would resignation of the Appointor of the trust constitute resettlement of the trust for CGT purposes? | A2: No | Q3: Would a renunciation signed by beneficiaries of the trust, X and Y, declaring that they will never accept any further benefits from the trust, constitute a resettlement of the trust? | A3: No

Relevant facts and circumstances: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: • your application for private ruling • copy of the Deed of Settlement (Trust Deed) The trustee of the Trust is Company A. The guardian and Appointor of the Trust is X. The schedule to the Deed details the 'specified beneficiaries' as; • X • Y • Company A The schedule of the Deed details the 'additional members of the class of general beneficiaries' as; • A • B, and • Certain other entities A clause of the Trust Deed provides; ..for the time being may at any time and from time to time by deeds revocable or irrevocable revoke add to or vary all or any of the trusts terms and conditions hereinbefore contained or the trusts terms and conditions contained in any variation or alteration or addition made thereto from time to time and may in like manner declare any new or other trusts terms and conditions concerning the Trust Fund or any part or parts thereof the trusts whereof shall have been so revoked added to or varied provided that the rule known as the Rule against Perpetuities is not thereby infringed and provided that such new or other trust powers discretions alterations or variations; 1) Insofar as the beneficial interests created by this Deed are revoked or added to or varied shall be for the benefit of all or any one or more of the General Beneficiaries of the next of kin of any of them 2) Shall not be in favour of or result in any benefit to any member of the excluded class 3) Shall not affect the beneficial entitlement to any amount set aside for any beneficiary prior to the date of the variation alteration or addition; and 4) Shall not enlarge the number of persons capable of falling within the description 'beneficiary' hereinbefore contained. Save as provided in this clause these presents shall not be capable of being revoked added to or varied. A further clause of the Trust Deed provides; Any Trustee Guardian or Appointor and any person who may by succession become a Trustee Guardian or Appointor may resign or renounce such a position by Notice in writing to the Trustees and forthwith upon the giving of such Notice the person giving the same shall for all purposes hereunder cease to be a Trustee Guardian or Appointor…

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

Reasons for decision: Detailed Reasoning - Trust resettlement - CGT event E1 or E2: CGT event E1 happens if 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 taxpayer transfers a CGT asset to an existing trust (subsection 104-60(1) of the ITAA 1997). Taxation Determination TD 2012/21 which discusses CGT events E1 and E2, sets out the Commissioner's view in respect to trust resettlements and whether or not a resettlement has occurred. TD 2012/21 asserts that an amendment to the terms of a trust will not result in the termination of a trust as long as: • the amendment is made pursuant to a valid exercise of power contained within the trust's constituent document; • the amendment does not cause the existing trust to terminate and a new trust to arise for trust law purposes; and • the effect of the amendment does not lead to a particular asset being subject to a separate charter of rights and obligations such as to give rise to the conclusion that that asset has been settled on terms of a different trust. | Detailed Reasoning - Application to your circumstances: Based on the information provided; • a clause of the Trust Deed specifically allows for a person to renounce their position as appointor. • a clause of the Trust Deed gives the trustee the power to amend or vary any terms and conditions of the trust deed • the current Guardian and Appointor of the Trust is X Therefore, as any amendment made to the Trust Deed to remove X and Y as specified beneficiaries will be made pursuant to a valid exercise of power contained within the trust deed, with the consent of the guardian, being X, the making of these resolutions will not give rise to the happening of a CGT event. Similarly, as there is a specific clause allowing an appointor to renounce their position, the removal of X as appointor of the trust (being an amendment made pursuant to a valid exercise of power contained in the trust deed) will also not give rise to the happening of a CGT event. Accordingly, there will be no resettlement of the trust when X and Y renounce their interests in the family trust, nor when X renounces their role as appointor.