Private ruling: CGT issues relating to proposed amendment to original trust deed
Date of advice: 11 April 2016
Published: June 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Will the proposed Amending Deed constitute a termination of the trust or creation of a new trust pursuant to CGT event E1 or CGT event E2 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.

Relevant facts and circumstances: The company is the current trustee of the Trust. The trust was established by deed made between an individual as settlor and a company as trustee. The original trustee entered into a deed of amendment and Deed of Appointment and Retirement. The Original Trust Deed contains the general power to amend the Trust under clause 3. The proposed amendments contained in the Amending Deed will update the terms of the Trust Deed to assist the Trustee in the administration and management of the Trust. The proposed amendments propose to delete the administrative powers contained in the Trust Deed to remove powers that allow the Trustee to make distributions to certain Beneficiaries. The Trustee as trustee of the Trust owns securities and assets in Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 104-55 | Income Tax Assessment Act 1997 Section 104-60 | Income Tax Assessment Act 1997 Section 102-25

Reasons for decision: Summary: A trust resettlement will occur for income tax purposes where one trust estate has ended and another has replaced it or a trust's terms are changed such that a particular asset has been settled on terms of a different trust. The effect of such a resettlement is that a disposal of the trust asset/s is deemed to occur. In consequence, capital gains could accrue to beneficiaries as a result of various CGT events, including events E1 and E2. 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 an amendment to the terms of a trust will not result in the termination of a trust as long as: • the amendment is made pursuant to a valid exercise of power contained within the trust's constituent document; • the amendment does not cause the existing trust to terminate and a new trust to arise 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 your 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.