Will amendments updating administrative terms of a trust trigger a resettlement for tax purposes?

Question

Will amendments to update administrative terms of a trust (such as converting a unit trust to a fixed trust) trigger a resettlement for tax purposes?

Answer

Generally, the amendments set out in the deed of variation should not amount to a tax resettlement of the underlying trust, for tax purposes. This is based on the current approach of the Australian Tax Office, as the variations are usually largely administrative in nature.

When more fundamental terms of the trust deed are amended, such as altering classes of beneficiaries, this may be more problematic, from a tax resettlement perspective, and specific tax/legal advice should be obtained, before proceeding.

Note: Stamp duty consequences of any variation must also be considered, with different rules applying in each relevant state.

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