Private ruling: Trust resettlement
Published: June 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Will the variations proposed to the Trust Deed trigger the happening of CGT event E1 or E2? | A1: No


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-55. | Income Tax Assessment Act 1997 Section 104-60

Reasons for decision: Summary: A trust resettlement will occur for income tax purposes where one trust estate has ended and another has replaced it. The effect of such a resettlement is that a disposal of the trust assets is deemed to occur. In consequence, capital gains could accrue to beneficiaries as a result of various CGT events. Commissioner has recently released Taxation Determination TD 2012/D4 which was published as a result of a recent court case CoT v Clark [2011] FCAFC 5; 2011 ATC 20-236; (2011) 79 ATR 550 (Clark's case). Whilst the case of Clark's case dealt with whether changes in a continuing trust were sufficient to treat that trust as a different taxpayer for the purpose of applying relevant losses, TD 2012/D4 accepts that the principles set out in Clark's case have broader application. TD 2012/D4 asserts that a valid amendment to a trust pursuant to an existing power will not result in termination of the trust and therefore will not result in CGT event E1 happening. Following the direction set out in TD 2012/D4, as the Trust Deed allows for new beneficiaries to be added, CGT event E1 or E2 does not arise in relation to the changes proposed.

Relevant facts: You intend on amending the Trust Deed to add new beneficiaries to the Trust. The proposed beneficiaries are relations of the primary beneficiary. Clause 15 of the original Trust Deed states that the Trustee has the powers to add 'any person' as a beneficiary.