Private ruling: Whether a CGT event will occur as a result of a change in trustees
Date of advice: 1 April 2016
Published: May 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Will either CGT event A1 or E2 happen if the legal titles of the shares are transferred from the individuals as trustees for the trust to a new corporate trustee, given that the beneficiaries and the terms of the trust will not change? | A1: No

Relevant facts and circumstances: The trust was established and individual trustees were appointed. The trustees own shares on behalf of the trust. The trustees intend to incorporate a company (corporate trustee) for the sole purpose of taking over as trustee of the trust. The individual trustees will be directors of the proposed corporate trustee. It is intended that the ownership of the shares will be transferred from the trustees to the corporate trustee. The beneficiaries and the terms of the trust will remain the same.

Relevant legislative provisions: Subsection 104-10(2) of the Income Tax Assessment Act 1997 | Subsection 104-60(1) of the Income Tax Assessment Act 1997

Reasons for decision: Summary: Subdivision 104-A of the Income Tax Assessment Act 1997 (ITAA 1997) discusses disposals of CGT assets. Subsection 104-10(2) of the ITAA 1997 states you dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner. A note to this subsection in part states a change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust. This means that CGT event A1 will not happen merely because of a change in the trustee. Subsection 104-60(1) of the ITAA 1997 states CGT event E2 happens if you transfer a CGT asset to an existing trust. A note to the subsection in part states a change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust. This means that CGT event E2 will not happen merely because of a change in the trustee. In this case the individual trustees of the trust intend to transfer legal ownership of the shares owned by the trust to a new corporate trustee, of which the individuals will be the directors. As there is merely a change in trustee neither CGT event A1 nor E2 will occur.