Private ruling: Capital gains tax and trust resettlement
Published: July 2014
Ruling period: Year ended 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2013

Ruling: Q1: Will capital gains tax (CGT) events E1, C2 or A1 happen to any or all of the trust assets if the trust deed is amended as proposed? | A1: No

Relevant facts and circumstances: The trust was established more than 20 years ago for the purpose of providing benefits for the settlor's relative, and his/her family. Under the trust deed, the settlor's relative is named as the Appointor of the trust. The trust deed currently provides that the trust will vest 30 days after the Appointor's death. The trustee wishes to extend the vesting date to the extent permissible by law so that the trust can continue to benefit the family after the Appointor's death. After the Appointor's death, the trustee wishes to be able to amend the trust deed should it be required to do so in the future. Therefore, the trustee wishes to amend the trust deed so that it is clear that the trustee is still able to amend the trust deed if there is no Appointor. The trust deed allows the trustee to revoke, alter or add to all or any of the provisions of the trust deed during the life of the Appointor The Appointor signed the private ruling application.

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 CGT consequences (events C2 or A1) 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.