Private ruling: Trust - variation to a trust deed
Date of advice: 23 October 2015
Published: October 2015
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Will capital gains tax (CGT) event E1 or E2 occur as a result of the proposed variation to the terms of the Trust? | 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 listed 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 happens if you create a trust over a CGT asset by declaration or settlement (section 104-55 of the Income Tax Assessment Act 1997 (ITAA 1997)). CGT event E2 happens if you transfer a CGT asset to an existing trust (section 104-60 of the ITAA 1997). 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.