Private ruling: Resettlement of Trust
Date of advice: 8 November 2016
Published: February 2017
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the proposed changes to the Trust Deed result in the creation of a new trust and will CGT event E1 or E2 occur? | A1: No.

Relevant facts and circumstances: The terms of the Trust gives the power to the trustee to amend the terms of the Trust with the consent of the guardian. It is proposed to make a variation to the Primary Beneficiaries under the power contained in the deed.

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

Reasons for decision: Summary: CGT event E1 arises in accordance with section 104-55 of the ITAA 1997 due to a trust being created over a CGT asset. This event will also be triggered if changes made to a trust alter the nature and character of the trust relationship such that the original trust ceases to exist and a new trust is created. CGT event E2 arises in accordance with section 104-60 of the ITAA 1997 as a CGT asset is transferred to a new trust. Where this event occurs as a result of a trust resettlement, the assets are considered to be transferred from the original trust to the new trust. Taxation Determination TD 2012/21 sets out the Commissioner's view in respect to trust resettlements and whether or not a resettlement has occurred. TD 2012/21 asserts that a valid amendment to a trust will not result in CGT event E1 or E2 occurring provided: • the amendment is made pursuant to an existing power; • the amendment does not cause the trust to terminate for trust law purposes; and • the effect of the amendment does not lead to a particular asset being subject to a separate charter of rights and obligations such as to give rise to the conclusion that that asset has been settled on terms of a different trust. In this case, the proposed variations to the existing trust deed would be a valid amendment to the Trust, not resulting in a termination of the Trust, and will not result in the happening of CGT event E1 or E2.