Private ruling: CGT - trust
Date of advice: 11 March 2022
Published: May 2022
Ruling period: Year ending 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Will the execution of the Proposed Deed of Variation to amend the terms of the Trust cause CGT event E1 or E2 to happen? | A1: No.

Relevant facts and circumstances: The Trust is a discretionary trust established by a trust deed. The Trust Deed provides amendment powers to the Trustee. The Trustee amended the terms of the Trust under a previous Deed of Variation and Appointment. The Proposed Deed of Variation contains the proposed amendment/s to the terms of the Trust; and the Recital contained details clarifying all the purported amendments in the previous Deed of Variation and Appointment. The ruling applicant provided a copy of the Trust Deed, the previous Deed of Variation and appointment, and the Proposed Deed of Variation.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-55 | subsection 104-55(1) | section 104-60 | subsection 104-60(1)

Reasons for decision: Summary: All legislative references are to the Income Tax Assessment Act 1997 unless otherwise specified. Subsection 104-55(1) provides that CGT event E1 happens if you create a trust over a CGT asset by declaration or settlement. Subsection 104-60(1) provides that CGT event E2 happens if you transfer a CGT asset to an existing trust. A change in the trustee of a trust does not constitute a change in the entity, that is the trustee of the trust - see subsection 960-100(2). This means that CGT event E1 or E2 will not happen merely because of a change in the trustee. Taxation Determination TD 2012/21 expresses the view (at paragraph 1) that in circumstances where the terms of a trust are changed pursuant to a valid exercise of a power contained within the trust's constituent document, CGT event E1 or E2 will not happen unless: • the change causes the existing trust to terminate and a new trust to arise for trust law purposes, or • the effect of the change 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. In this case, the proposed amendment/s contained in the Proposed Deed of Variation, would be considered within the Trustees' powers to amend set out in the Trust Deed. Therefore, based on the assumption that the amendment/s will constitute a valid exercise of the Trustees' powers to amend under the Trust Deed and applying TD 2012//21, the execution of the Proposed Deed of Variation to amend the terms of the Trust will not cause CGT event E1 or E2 to happen.