Whether the execution of the Draft Deed in relation to the Trust would: a) Cause any CGT event to occur under Part 3-1 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the Trust of Trust assets; or b) Cause any other income tax consequences (whether by operation of the ITAA 1936 or the ITAA 1997) in relation to the Trust?
No. 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), provides that a valid amendment to a trust pursuant to an existing power will not result in termination of the trust and therefore will not result in CGT events E1 or E2 happening. The proposed amendment contained within the Draft Deed is a valid exercise of the Trustees powers and extending the Trust's vesting date will not infringe on the rule against perpetuities. The vesting date has not occurred and the proposed change to the vesting day will not alter the beneficiaries or the Trust property, or beneficial entitlements to income or capital of the Trust. The proposed change will not change the continuity of the Trust or the trust property.
Therefore, the proposed amendment to the Deed will not cause the Trust to vest or trigger any CGT consequences under Part 3-1 of the ITAA 1997 and based on the facts provided, there are no other income tax consequences. This ruling applies for the following period : Income tax year ending 30 June 20XX The scheme commenced on: 1 July 20XX
1. Company A is the Trustee for the Trust. 2. On 21 November 19XX, the Trust was settled by Trust Deed between the settlor and the Original Trustees. 3. On 6 February 19XX, the Original Trustees were replaced by the Trustee (Change of Trustee). 4. Further amendments were made by deeds dated about 20XX and 30 June 20XX. 5. Copies of the Trust Deed, the Change of Trustee and the Amendment Deeds have been provided. 6. The shareholders of the Trustee are Person B and Person C. 7. Person B and Person C are also directors of the Trustee. 8. Person B and Person C have three children; Person D, Person E and Person F. 9. The Trust's primary assets comprise XX% of shares in Company W and direct and indirect interests in Australian real property. 10. The Trust Deed outlines the treatment of income. 11. The Trust Deed outlines the treatment of capital. 12. The Trust has a narrow class of discretionary objects, being Person C and Person D named as beneficiaries, and any child of Person B's being born before the Vesting Day - being Person E and Person F.
13. The class of beneficiaries is widened in some limited circumstances as set out in the Trust Deed. 14. The Trust Deed outlines the definition of Vesting Day: The "Vesting Day" means the day on which shall expire the period of sixty years after the execution of this Deed of Settlement or until twenty-one years after the death of the last survivor of the descendants now living of His late Majesty King George the Sixth whichever shall be the shorter period or such earlier date as the Trustees may at any time not earlier than one year after the date of the Settlement appoint to be the Vesting Day. 15. The Trust Deed contains an amendment power: The Trustees in addition to any powers in that behalf conferred on Trustees by statute or by these presents or otherwise shall have the following additional powers authorities and discretions: To alter by Deed any of the trusts powers discretions and authorities herein contained other than the trusts limiting the interest of and defining the beneficiaries hereunder which said trusts shall be irrevocable.
16. Pursuant to the amendment power contained in the Trust Deed, the Trustee is now considering amending the definition of the Vesting Day so that it reads as follows: The "Vesting Day" means the day on which shall expire the period of twenty-one years after the death of the last survivor of descendants now living of His late Majesty King George the Sixth or such earlier date as the Trustees may at any time not earlier than one year after the date of the Settlement appoint to be the Vesting Day. 17. The amendment would be implemented by way of executing a deed of amendment, a draft has been provided. 18. The Trust Deed contains the Rule Against Perpetuities:
The exercise of the Trustees' discretion under Clause 2(a) 2(b) and 2(c) hereof shall be subject in all respects to the rule of law known as the Rule against Perpetuities to the intent that no part of the income of the Trust Funds shall be paid or capable of being paid by the Trustees to trustees of any other Trust unless the person entitled to the capital thereof must necessarily attain a vested interest therein on or before the Vesting Day and this Deed and clause 2(a) (b) and (c) shall be construed accordingly. 19. The Trust Deed contains the Vesting rules: Notwithstanding anything to the contrary herein contained the Trustees may at any time after the expiration of one year from the date of these presents give to the person or persons entitled under the provisions of Clause 8 hereof appoint a new Trustee notice in writing of their intention to appoint an earlier date for the vesting of the Trust Funds and forty-two days (or such earlier period as the Trustees shall accept) after such notice in writing has been served upon such person the Trustees may by Deed appoint an earlier date for the vesting of the Trust Funds for the purposes of Clauses 1 and 2 hereof.
The Income Tax Assessment Act 1997 section 104-55 The Income Tax Assessment Act 1997 section 104-60