Private ruling: Trust resettlement
Date of advice: 18 May 2026
Published: 17 August 2026
Ruling period: Income years ending 30 June 20XX to 20XX

Ruling: Q2: Will CGT event E1 or E2 under sections 104-55 and 60, respectively, of the Income Tax Assessment Act 1997 (ITAA 1997) happen upon the Proposed Amendment to the Deed? | A1: No. | Q3: Will the proposed changes to the shareholding of the Trustee company result in CGT event E1 or E2 under sections 104-55 and 60, respectively, of the ITAA 1997? | A2: No.

Relevant facts and circumstances: 1) The Trust is a discretionary trust established by a Deed of Trust (Deed). 2) The Company is the corporate trustee of the Trust (the Trustee). Current drafting of Deed 3) The Deed provides that the beneficiaries include two individuals, their lineal descendants and companies in which any of the preceding hold beneficial interests. 4) The Deed allows for the valid extension of the vesting date of the Trust (Vesting Date). The current Vesting Date is currently limited to XX calendar years from the Trust commencing. Proposed Amendment 5) Following replacement of the X X Act XXXX (XXX) with the X X Act XXXX (XXX), trusts are now allowed a perpetuity period of up to XXX years. As such, the Trustee proposes to extend the Vesting Date by exercising its power under the terms of the Deed to vary the Deed itself. 6) It is proposed that the XX calendar year limit of the Vesting Date be extended to a period of XXX years. 7) The Trust property and members will remain unchanged. 8) The Proposed Amendment will not cause any particular asset/s to be subject to a separate charter of right and obligations. 9) The Trust will not have already vested at the time of the Proposed Amendment. Current shareholdings in the Trustee 10) An individual (Person A) holds 50% of the shares in the Company. The remaining shares are held in equal proportions amongst The Person A's children (Children). Succession Plan - conversion of share class and variation of rights of Trustee 11) Upon Person A's passing, their shares will be distributed to the Children as tenants in common in equal shares. 12) It is intended to implement a succession and control strategy to ensure the family business and associated trust continues to be controlled by Person A's lineal descendants by: a) in the first instance, after Person A's passing, control and financial benefits of both the Trust and Trustee being shared equally between the Children. b) upon the death of any Child, control and benefits of that particular Child being passed to that Child's children per stirpes . 13) The strategy consists of: a) a shareholder agreement (the Shareholder Agreement) being signed by the Children prior to Person A's death b) converting the shares into the separate classes representing each Child's allocation of shares. 14) The Shareholder Agreement: a) commences upon the conversion to the new class shares b) only permits the disposal of shares to: i) existing shareholders or ii) to a new person: (1) that person executes and delivers to each existing shareholder a deed of accession, and (2) with the written consent of all shareholders. Other information 15) All above-mentioned entities are Australian tax residents.


Reasons for decision: Summary: 16) CGT event E1 or E2 under sections 104-55 and 60, respectively, of the ITAA 1997 will not happen upon the Proposed Amendment to the Deed. | Detailed Reasoning - Detailed reasoning: 17) Taxation Determination TD 2012/21 Income Tax: does CGT event E1 or E2 in sections 104-55 or 104-60 of the Income Tax Assessment Act 1997 happen if the terms of a trust are changed pursuant to a valid exercise of a power contained within the trust's constituent document, or varied with the approval of a relevant court? sets out the Commissioner's view on whether, as a result of changes made to an existing trust, a new trust comes into existence causing CGT event E1, or an asset is transferred to another trust causing CGT event E2, to happen. 18) TD 2012/21 expresses the view that CGT event E1 or E2 does not happen if the terms of the trust are changed pursuant to a valid exercise of a power contained within the trust's constituent document, or varied with the approval of a relevant court, unless: a) the change causes the existing trust to terminate and a new trust to arise for trust law purposes, or b) the effect of the change or court approved variation is such as to lead to a particular asset being subject to a separate charter of rights and obligations such as to give rise to the conclusion that the asset has been settled on terms of a different trust. 19) Paragraph 21 of TD 2012/21, in part, notes that: ... as a general proposition, it would seem that the approach adopted by the Full Federal Court in Commercial Nominees , as explained by Edmonds and Gordon JJ in Clark , is authority for the proposition that assuming there is some continuity of property and membership of the trus t, an amendment to the trust that is made in proper exercise of a power of amendment contained under the deed will not have the result of terminating the trust, irrespective of the extent of the amendments so made so long as the amendments are properly supported by the power. 20) Paragraph 24 of TD 2012/21 further explains that: Even though Clark and Commercial Nominees were decided in the context of whether changes in a continuing trust were sufficient to treat that trust as a different taxpayer for the purpose of applying relevant losses, the ATO accepts the principles set out in these cases have broader application. Relevantly, the principles established by those cases are also relevant to the question of the circumstances in which CGT event E1 or E2 may happen as a result of changes being made to the terms of an existing trust pursuant to a valid exercise of a power in the deed (including a power to amend). In light of those principles, the ATO accepts that a change in the terms of the trust pursuant to exercise of an existing power (including an amendment to the deed of a trust), or court approved variation, will not result in a termination of the trust and, therefore, subject to the observation in paragraph 27 below, will not result in CGT event E1 happening. 21) It is noted in paragraph 27 of TD 2012/21 that: Even in instances where a pre-existing trust does not terminate, it may be the case that assets held originally as part of the trust property commence to be held under a separate charter of obligations as a result of a change to the terms of the trust - whether by exercise of a power under the deed (including a power to amend) or court approved variation - such as to lead to the conclusion that those assets are now held on terms of a distinct (that is, different) trust. 22) TD 2012/21 provides a number of examples. Example 3 and 3A provide examples where extension of the vesting date does not, in the Commissioner's view, give rise to the happening of a CGT event. | Detailed Reasoning - Application to your circumstances: 23) The amendment to 'Vesting Day' is a valid exercise of a power of amendment contained within the Deed that does not infringe upon the rule against perpetuities. 24) The Commissioner considers that, following the execution of the Proposed Amendment, there will be continuity: a) of the Trust property b) in the membership of the Trust, and c) in the operation of the Trust. 25) The underlying principles encapsulated in paragraphs 21 and 24 of TD 2012/21 provide that, assuming there is some continuity of property and membership of a trust, an amendment to the trust that is made in a proper exercise of a power of amendment contained under the trust deed will not result in a termination of the trust - regardless of the extent of the amendments, so long as the amendments are properly supported by the power. 26) On this basis, as continuity in the membership, operation and property of the Trust would be maintained following the execution of the Proposed Amendment to the Deed pursuant to a valid exercise of the amendment power in the Deed, such an amendment would not result in a termination of the Trust. This is consistent with the decisions in both the Commercial Nominees and Clark cases. 27) Having regard to paragraph 27 of TD 2012/21, the Commissioner is also satisfied that the Proposed Amendment would not result in an asset of the Trust being subject to a separate charter of rights and obligations such as to give rise to the conclusion that an asset of the Trust would be settled on the terms of a different trust. 28) Therefore, executing the Proposed Amendment pursuant to a valid exercise of the amendment power in the Deed would not cause either CGT event E1 or E2, under sections 104-55 and 104-60, respectively, to happen. | Summary: 29) The proposed changes to the shareholding of the Trustee company will not result in CGT event E1 or E2 under sections 104-55 and 60, respectively, of the ITAA 1997 to happen. | Detailed Reasoning - Detailed Reasoning: 30) The proposed changes to the shareholding of the Trustee company does not alter the terms or conditions of the Trust. No power under the Deed will be exercised by the Trustee as a result of these proposed changes. 31) Furthermore, the proposed changes to the shareholding do not change the ultimate natural persons who may benefit under the trust. 32) It is relevant that the proposed changes relate solely to the ownership and rights attaching to shares in the corporate trustee, rather than to the trust property itself or to the equitable interests held by beneficiaries under the Trust. A change in the shareholding or control of a trustee company does not, of itself, result in any change to the trust relationship, the trust property, or the rights of beneficiaries in respect of that property. 33) As no trust asset is transferred to another trust, and no new trust is created over any asset, there is no settlement or resettlement of trust property. Accordingly, neither CGT event E1 (creation of a trust over a CGT asset) nor CGT event E2 (transfer of a CGT asset to an existing trust) can arise as a result of the proposed changes to the shareholding of the Trustee company. 34) The Trust will continue to exist in its current form and continue to hold its assets for the same beneficiaries. 35) As such, the proposed changes to the shareholding of the Trustee company will not result in CGT event E1 or E2 under sections 104-55 and 60, respectively.

Does IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar.