Private ruling: Trust resettlement
Date of advice: 25 November 2015
Published: February 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Will the proposed Deed of Amendment give rise to capital gains tax (CGT) events E1 or E2 under sections 104-55 or 104-60 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.

Relevant facts and circumstances: The trust was established in mid-20XX. The trustee of the trust is a private company. There are less than five unitholders of the trust. The trustee and unitholders now wish to amend the unit trust deed in order to satisfy the criteria of a "fixed trust" under the relevant legislation. No assets are being transferred. The OSR has confirmed by private ruling that no stamp duty is payable on the proposed amendments. The clause in the trust deed that deals with the amendment of the trust states: The Trustee may with the consent of a resolution in respect of which unit holders holding not less than 75% of the units then issued shall have voted in favour at any time by deed make any amendment or addition to this Deed which it has approved having regard to all the circumstances of the case and provided that any such amendment or addition will not prejudice the interest of unit holders without their written consent and after the execution of any such amending deed this Deed shall take effect as amended.

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

Reasons for decision: Summary: CGT event E1 is triggered when a trust resettlement occurs, that is, when one trust estate has ended and another has replaced it. Tax Determination TD 2012/21 sets out the Commissioner's view in respect to trust resettlements and whether or not a resettlement has occurred. TD 2012/21 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. In your case, the proposed variations to the existing Trust deed would be a valid amendment to the trust, not resulting in a termination of the trust, and will not result in the happening of CGT event E1 or E2. There are no other CGT consequences relating to the variation of the trust deed, however, we have not considered any CGT consequences that may arise from the disposal of any CGT asset of the trust as a result of these changes.