When will a variation/amendment to a trust deed cause a resettlement?

Question

When will a variation/amendment to a trust deed cause a resettlement? 

Answer

The relevant Taxation Determination TD 2012/21 addresses the issue with the following question:

Does CGT event E1 or E2 in S. 104-55 or 104-60 of the ITAA 1997 happen if the terms of a trust are changed pursuant to a valid exercise of power contained within the trust's constituent document, or varied with the approval of a relevant court?

The Ruling states that neither CGT Event E1 or E2 will happen unless:

  • the change causes the existing trust to terminate and a new trust to arise for trust law purposes, or
  • 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. 

The TD outlines a number of examples to exemplify the circumstances in which a trust deed may be varied without causing a resettlement. 

It is generally recommended that you seek guidance from a solicitor, accountant or specialist to help determine whether a variation/amendment in question will cause a resettlement in the circumstances of your trust deed. 

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