Private ruling: Trust resettlement
Published: February 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Will the changes proposed in the Amending Trust Deed trigger the happening of CGT event E1? | A1: No

Relevant facts and circumstances: Pursuant to the power contained in clause 5 of the Trust Deed, the Trustees wish to vary the provisions of the Trust Deed. The Amending Deed proposes to insert 'distributor provisions' into the Trust Deed to facilitate estate planning.

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

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. Draft Tax Determination TD 2012/D4 sets out the Commissioner's view in respect to trust resettlements and whether or not a resettlement has occurred. TD 2012/D4 asserts that a valid amendment to a trust will not result in the termination of a trust as long as: § the amendment is made pursuant to an existing power; § the amendment does not cause the trust to terminate 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. If these conditions are met CGT event E1 in section 104-55 of the Income Tax Assessment Act 1997 (ITAA 1997) will happen. In your case, as the Trustee is acting within their powers and in line with the conditions declared in TD 2012/D4 CGT, event E1 does not arise in relation to the changes proposed in the Amending Deed.

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