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Edited version of your written advice
Authorisation Number: 1013051281567
Date of advice: 13 July 2016
Ruling
Subject: CGT - Trust resettlement on change of Trustee or appointing an Appointor
Question 1
Would the changing of the trustee in the trust deed of your family discretionary trust, constitute a resettlement of the trust for CGT purposes?
Answer
No
Question 2
Would the inclusion of an Appointor into the trust deed of your family discretionary trust, constitute a resettlement of the trust for CGT purposes?
Answer
No
This ruling applies for the following period(s)
Year ended 30 June 2017
The scheme commences on
1 July 2016
Relevant facts and circumstances
The current trustee for the trust is a company with X and Y as directors.
The same X and Y will be the directors of the new trustee company and will be the appointors of the family trust.
Clauses 30 and 31 of the trust deed allows the trustees to make amendments to the trust deed.
Clause 30. Power of Trustee to amend vary or revoke trusts powers and provisions
"…..the Trustee alter or vary or absolutely revoke all or any of the trust powers and provisions herein declared concerning the trust fund….."
Clause 31. Power of Trustee to remove and appoint Trustee
"……the Trustee appoint any other person to be a Trustee of these trusts with him or her or it and may at any time retire as Trustee of these trusts…."
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-55
Income Tax Assessment Act 1997 Section 104-60
Reasons for decision
Trust resettlement - CGT event E1 or E2
CGT event E1 happens if a trust is created over a CGT asset by declaration or settlement (subsection 104-55(1) of the ITAA 1997).
CGT event E2 happens if a taxpayer transfers a CGT asset to an existing trust (subsection 104-60(1) of the ITAA 1997).
Taxation Determination TD 2012/21 which discusses CGT events E1 and E2, 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.
Application to your circumstances
Based on the information provided;
• Clause 30 gives the trustee the power to amend or vary any terms and conditions of the trust deed
• Clause 31 gives the trustee the power to remove and appoint a Trustee
Therefore, as any amendment made to the Trust Deed to replace the trustee company will be made pursuant to a valid exercise of power contained within the trust deed, the making of these resolutions will not give rise to the happening of a CGT event.
Similarly, the appointment of an Appointor of the trust being an amendment made pursuant to a valid exercise of the general power of the Trustee to alter or vary or absolutely revoke all or any of the trust powers and provisions contained in the trust deed, will also not give rise to the happening of a CGT event.
Accordingly, there will be no resettlement of the trust when there is a change in Trustee or the appointment of an Appointor.
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