Private ruling: CGT events - trust
Date of advice: 1 August 2022
Published: November 2022
Ruling period: year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will CGT event E1 in section 104-55 of the Income Tax Assessment Act 1997 (ITAA 1997) happen as a result of executing the Deed of Variation? | A1: No. | Q2: Will CGT event E2 in section 104-60 of the ITAA 1997 happen as a result of executing the Deed of Variation? | A2: No.

Relevant facts and circumstances: The Trust is a testamentary trust that is binding on the Trustee and all Members. The applicant provided the trust deed. The Proposed Deed of Variation sets out the proposed new terms, conditions and rules of the Trust. The Trust Deed permits the Trustee to amend the terms of the trust.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-55 | Subsection 104-55(1) | Section 104-60 | Subsection 104-60(1)

Reasons for decision: Summary: 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.' In Taxation Determination TD 2012/21 Income tax: does CGT event E1 or E2 in sections 104-55 or 104-60 of the Income Tax Assessment Act 1997 happen if the terms of a trust are changed pursuant to a valid exercise of a power contained within the trust's constituent document, or varied with the approval of a relevant court? (TD 2012/21) the Commissioner states (at paragraph 1) that in circumstances where the terms of a trust are changed pursuant to a valid exercise of a power contained within the trust's constituent document, CGT event E1 or E2 will not happen unless: a) the change causes the existing trust to terminate and a new trust to arise for trust law purposes, or b) the effect of the change is such as to 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. As detailed in the facts, the Deed of Variation proposes to vary the Trust provisions using the variation power in clause 17 of the Trust provisions. For the purpose of the ruling decision, it is assumed that the amendments set out in the Deed of Variation constitute a valid exercise of the Trustee's amendment power. On the basis of the assumption and applying TD 2012/21, neither CGT event E1 nor CGT event E2 will happen in relation to the assets of the Trust as a result of the Trustee varying the Trust provisions, as proposed.