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

Ruling: Q1: Will the proposed amending deed constitute a termination of the Trust or creation of a new trust pursuant to capital gains tax (CGT) event E1 or E2 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: 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 Trust Deed • copy of the proposed Deed of Amendment to the Trust Deed • copy of the Register of Unit Holders The appointors and registered holders of the Trust are A, B, C and D. The registered holders were issued ordinary units on establishment of the Trust. The register of unit holders shows; Unit holder name No. of units Unit class A and B XX Ordinary C and D XX Ordinary The General Beneficiaries of the trust include; • Class A Beneficiaries - which include A and B (Appointors of the trust), persons related to the Appointors and, certain entities in which the Appointors (or persons related to the Appointors) have an interest. • Class B Beneficiaries - which include C and D (Appointors of the trust), persons related to the Appointors and, certain entities in which the Appointors (or persons related to the Appointors) have an interest. The trust deed provides a general power to amend the Trust which states; With the prior unanimous approval of the Appointors and not otherwise the Trustee for the time being may at any time and from time to time by resolution (whether oral or in writing) deed or deed poll add to or vary all or any of the trusts, provisions terms and conditions contained in this deed but so that the law against perpetuities is not in any case thereby infringed and so that nay new or other trust, powers, discretions, alterations or variations: a) will not be in favour of or for the benefit of the Settlor but will otherwise be for the benefit of all or any one or more of the General Beneficiaries (as added to as herein provided) or the next of kin of any of them; and b) will not affect the beneficial entitlement to any amount set aside for any beneficiary prior to the date of the variation, alteration, addition, payment or application The Trust Deed provides the Trustee the power to include or exclude beneficiaries; The Trustee may with unanimous consent of the Appointors at any time or times before the Vesting Day declare any individual or entity to be removed as beneficiary or to be ineligible to become a beneficiary and such person or entity shall thereupon be excluded from any benefit under the trusts hereby created (but without prejudice to the beneficial entitlement to any amount set aside for any excluded beneficiary prior to the date of such declaration). Any such declaration shall be revocable unless expressed to be otherwise. The removal of beneficiaries may be by resolution, (whether oral or in writing) deed, or deed poll. The trust does not have any financial accounts and has never made any distributions of income or capital to any of its beneficiaries or its registered holders. The trust never received any income or capital. The Trust has been maintained as a unit trust and proposes to remove administrative powers within the Trust Deed to permit it to exercise various discretions which it has never used. The Trustee has never exercised any of the clauses relating to issuing different classes of units or classes of unit assets and never exercised any of its rights or powers relating to any of the Class A and Class B Beneficiaries. The Trustee has never exercised any powers to make any distributions to the Class A Beneficiaries or the Class B Beneficiaries. The beneficial owners of the Trust are the Registered Holders since the establishment of the Trust and will continue to be the Registered Holders following the proposed execution of the amending deed. The Trustee owns shares in a company. Proposed amendments to the Trust Deed The proposed amendments contained in the amending deed will update the terms of the Trust Deed to assist the Trustee in the administration and management of the Trust. The proposed amendments proposes to delete the administrative powers contained in the Trust Deed to remove powers that allow the Trustee to make distributions to Class A Beneficiaries and Class B Beneficiaries and remove clauses relating to issuing different classes of units and classes of unit assets. The amending deed proposes to remove all references to the Class A Beneficiaries and the Class B Beneficiaries and powers relating to classes of units and unit assets which are provisions that have never been utilised by the Trustee. Clauses 1 and 2 of the proposed Deed of Amendment provide; The Trust Deed is, without termination of the trusts thereby constituted, amended as set out in this Deed. Pursuant to clause XX of the Trust Deed, the Trustee with the unanimous consent of the Appointors removes and excludes any Class A General Beneficiaries and Class B General Beneficiaries as a beneficiary to this Deed unless such person is a Registered Holder or is issued additional units as a Registered Holder. The Trustee confirms the removal and exclusion of Class A General Beneficiaries and Class B General Beneficiaries by the deletion of these items in the Schedule and all references to Class A General Beneficiaries and Class B General Beneficiaries from the Trust Deed in its entirety.

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 gives the trustee the power to vary all or any of the trusts provisions terms and conditions contained in the deed with the prior unanimous approval of the Appointors. • A clause provides that the Trustee may, with unanimous consent of the Appointors, at any time or times before the Vesting Day declare any individual or entity to be removed as beneficiary • The current Appointors are the registered unit holders and will continue to be the Appointors and registered unit holders after the proposed Deed of Amendment is executed • The Deed of Amendment provides that the trustee has obtained prior written consent from the Appointors (and registered unit holders) to the proposed amendments to the Trust Deed. Therefore, as the proposed Deed of Amendment will; • be made pursuant to a valid exercise of power contained within the trust's constituent document • not cause the existing trust to terminate, and • not lead to a particular asset being settled on terms of a different trust it will not constitute a termination of the Trust or creation of a new trust pursuant to CGT events E1 or E2 of the Income Tax Assessment Act 1997 (ITAA 1997).