Private ruling: Trust deed amendment
Date of advice: 19 December 2022
Published: 20 February 2023
Ruling period: Income year ending 30 June 20XX
Date scheme commenced: XX XX XX

Ruling: Q1: Will CGT event E1 or E2 in sections 104-55 or 104-60 of the Income Tax Assessment Act 1997 happen when the Deed of Amendment is executed to amend the terms of the X Unit Trust (Unit Trust)? | A1: No.

Relevant facts and circumstances: 1. On XX XX XX, COY A (trustee) and COY B as trustee of the Y Trust (the first unit holder) executed a trust deed (Trust Deed) establishing the Unit Trust. 2. The unit holders (Unit Holders) of the Trust are: • the trustee Y Trust • the trustee of Z Trust. 3. The trustee now wishes to amend the Trust Deed of the Unit Trust in order to satisfy the criteria of a fixed trust under section X of the X Act . 4. Clause 10 of the Trust Deed states: The Trustee may with the consent of the Unit Holders at any time or from time to time by Deed revoke, add to or vary all or any one of the trusts, terms and conditions contained herein or the trusts, terms and conditions contained in any variation or alteration or addition made hereto from time to time and may, by the same or any other Deed, declare any new or other trusts, terms or conditions concerning the Trust Fund or any part thereof provided that the rule known as the rule against perpetuities (as affected by any statute for the time being in force in the relevant jurisdiction mentioned in the Schedule hereto) is not thereby infringed and provided that such new or other trusts, powers, discretions, alterations or variations:- shall not be in favour or for the benefit of the Trustee or any person claiming under or in light of the Trustee; shall be made in favour of or for the benefit of the Unit Holders or one or some of them; shall not affect the beneficial entitlement to any amount held, applied or set aside for any one of the Unit Holders prior to the date of the revocation, addition or variation. Assumptions 5. No assets are being transferred. 6. There will be no changes to the Unit Holders when the Deed of Amendment is executed. 7. The Deed of Amendment is not part of a broader scheme or arrangement. 8. The terms of the Unit Trust are changed in the manner set out in the Deed of Amendment pursuant to a valid exercise of a power contained within the Trust Deed.

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

Reasons for decision: Summary: No. | Detailed Reasoning - Detailed reasoning: 9. CGT event E1 happens if a trust is created over a CGT asset by declaration or settlement (subsection 104-55(1)). 10. CGT event E2 happens if you transfer a CGT asset to an existing trust (subsection 104-60(1)) 11. The Commissioner's view on CGT events E1 or E2 in relation to changes to a trust deed is contained in Taxation Determination TD 2012/21 Income tax: does CGT event E1 or E2 in sections 104-55 or 104-60 of the Income Tax Assessment Act 1997 happen if the terms of a trust are changed pursuant to a valid exercise of a power contained within the trust's constituent document, or varied with the approval of a relevant court? (TD 2012/21). 12. TD 2012/21 states [1] : • CGT event E1 and E2 will not happen where the terms of the trust are changed pursuant to a valid exercise of a power contained within the trust's constituent document, or varied with the approval of a relevant court, unless: o the change causes the existing trust to terminate and a new trust to arise for trust law purposes, or o the effect of the change or court approved variation 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 that asset has been settled on terms of a different trust. • Where there is some continuity of property and membership of the trust, an amendment to the trust that is made in proper exercise of a power of amendment contained under the deed will not result in the termination of the trust so long as the amendments are properly supported by the power. 13. The changes set out in the Deed of Amendment will be executed pursuant to a valid exercise of a power contained with the Trust Deed. 14. No assets are being transferred and there will be no changes to the Unit Holders when the Deed of Amendment is executed. 15. As the changes will be made pursuant to a valid power under the Trust Deed and there is some continuity of property and membership, the Unit Trust will not terminate or be resettled or cause any of the assets to be transferred to a separate and existing trust. 16. In accordance with TD 2012/21, neither CGT event E1 nor CGT event E2 will happen when the Deed of Amendment is executed to change the terms of the Unit Trust that is made pursuant to a valid exercise of a power contained within the Trust Deed. [1] Refer paragraph 1 and 21 of TD 2012/21.

Reasons for decision: All references are to the Income Tax Assessment Act 1997 unless otherwise specified. | Question 1: Will CGT event E1 or E2 in sections 104-55 or 104-60 of the Income Tax Assessment Act 1997 happen when the Deed of Amendment is executed to amend the terms of the X Unit Trust (the Unit Trust)?