Private ruling: CGT - trust resettlement
Date of advice: 20 August 2024
Published: 30 September 2024
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Will the execution of the Deed of Variation cause capital gains tax (CGT) event E1 in section 104-55 of the Income Tax Assessment Act 1997 (ITAA 1997) to happen? | A1: No.The proposed amendment contained within the Deed of Variation is a valid exercise of the Trustees powers and the variation to the definition of Beneficiaries will not cause the existing trust to terminate; nor will it lead to a particular asset being settled on terms of a different trust. In addition, the variation will not result in a change of ownership of any of the trust assets. No material change to the rights of the Beneficiaries with respect to the trust property will occur as a result of the execution of the Deed of Variation. The distribution of income and capital by the Trustee will continue to be discretionary in nature. As such, CGT Event E1 in section 104-55 of the ITAA 1997 will not happen when the Deed of Variation is executed.

Relevant facts and circumstances: You are a discretionary trust established by deed (Trust Deed). Your Trust Deed gives the Trustee the power to: (a) pay, apply or set aside the income of the trust amongst the beneficiaries in such proportions and manner as the Trustee in the absolute discretion of the Trustee from time to time deems fit, or (b) accumulate the income. The Trust Deed also gives the Trustee the power to vary any provision of the Trust Deed and may declare any new or other trusts, powers or discretions concerning the trust fund or any part of it, including without limitation, expanding or contracting the class of persons who are Beneficiaries or removing one class of such persons and replacing it with another, but so that the new or other trusts, powers, discretions, alterations or variations (for relevant purposes) do not affect the beneficial entitlement to any amount already set aside for or vested in any Beneficiary unless that Beneficiary consents. The Trustee wishes to vary the Trust Deed, and the Appointors consent to such variations, by executing a Deed of Variation which will, for the purposes of income distributions only, vary the definition of Beneficiaries in the Trust Deed.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-55