Private ruling: Capital gains tax - trust resettlement – CGT events E1, E2 and A1
Date of advice: 28 November 2018
Published: March 2019
Ruling period: Financial year ending 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the proposed variation to your Trust Deed (Deed) to remove Individual A and Individual B as primary beneficiaries cause CGT event A1, E1 or E2 to happen? | A1: No. Your circumstances are comparable to those in Example 1 in Taxation Determination TD 2012/21. The variation to the Deed is a valid exercise of the Trustees powers and the removal of two primary beneficiaries will not cause the existing trust to terminate; nor will it lead to a particular asset being settled on terms of a different trust. In addition, the variation will not result in a change of ownership of any of the trust assets. TD 2012/21 can be found in the legal database on ato.gov.au.

Relevant facts and circumstances: You have provided a copy of your Deed. The Deed forms part of the arrangement that is being ruled on. You are a discretionary trust established a number of years ago. Your trustee is a company incorporated in Australia. Your settlor is Individual X. Your Guardian and Appointor is Individual A. Your primary beneficiaries as named in the Schedule to the Deed are: ● Individual A ● Individual B ● Individual C, and ● Individual D. Individual A and Individual B are related to Individual C and Individual D. You hold a number of assets including loan receivables and units in two unit trusts. Each unit trust holds real property assets that are leased to third parties and used to derive rental income. Individual A and Individual B ordinarily reside outside Australia and are not Australian citizens or permanent residents. As a consequence, the two unit trusts are absentee trusts and therefore liable for the absentee owner surcharge (AOS) on their respective landholdings each year. There are no plans to dispose of the properties. The unit trusts will continue to be liable for the AOS indefinitely until the properties are sold. Individual A and Individual B have not been presently entitled to any distributions of income or capital from you at any time since you were established. The Trustee has the power under your Deed to, at any time and from time to time, with the consent of the Guardian, by deed, revoke, add to, or vary all or any of the provisions of your Deed. With the consent of the Guardian, you propose to vary your Deed to remove Individual A and Individual B as primary beneficiaries. Individual A and Individual B will continue to be eligible beneficiaries, being related to Individual C and Individual D.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 104-55 | Income Tax Assessment Act 1997 section 104-60