Private ruling: Beneficial ownership of trust assets
Date of advice: 17 January 2020
Published: March 2020
Ruling period: Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2019

Ruling: Q1: Are the shares held by the Trust in the Company, and the Property, still considered to be pre capital gains tax (CGT) assets? | A1: Yes. The shares held by the Trust, and the Property, did not stop being pre CGT assets as the majority underlying interests in the assets have continued to be held by the ultimate owners who held majority underlying interests in the asset immediately before 20 September 1985. Taxation Ruling IT 2340 states that where a trustee of a discretionary trust continues to administer a trust for the benefit of members of the same family, the Commissioner will find it reasonable to assume that majority underlying interests in the trust assets have not changed. | Q2: Will any future disposal of shares in the Company constitute a CGT event for the relevant children and grandchildren of the individuals? | A2: No. Although the Trust has vested, the CGT assets are still held by the Trustee as none of the beneficiaries have become absolutely entitled to the assets of the Trust as against the Trustee. Taxation Ruling TR 2004/D25 confirms that a beneficiary, who has a vested and indefeasible interest in an entire trust asset, is unable to call for the asset to be transferred to them where there are multiple assets that cannot be conveniently divided.

Relevant facts and circumstances: The Company was established prior to 20 September 1985 with shares held by two individuals. The Property was acquired by the Company prior to 20 September 1985. The major asset of the Company is the Property. The Trust was set up prior to 20 September 1985. At some time after the Trust was created, but before 20 September 1985, the ordinary shares in the Company became owned by the Trust. The Trust Deed states that the vesting day is the day on which shall expire the period of 25 years after the execution of the settlement or the period of 21 years after the death of the last survivor of the descendants now living of his late Majesty King George the Sixth whichever shall be the shorter The Trust vested after 20 September 1985. The Trust Deed provided that upon the Trust vesting, if the Trustee had made no contrary decision, the children of the individuals became entitled to the assets of the Trust with the proviso that in the event of the death of a child before the Trust vested, that child's share would vest in the child's children. The current beneficiaries are X of the children with X of the grandchildren sharing a fraction of a share.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 149-30