1 Does CGT event E1 or E2 in sections 104-55 or 104-60 of the Income Tax Assessment Act 1997 (ITAA 1997) occur upon the proposed amendments to the Trust Deed?
1 No. Question 2 If property is held on revenue account, would a disposal occur upon the proposed amendments to the Trust Deed that could result in an assessable amount or deductible amount under section 6-5, section 8-1 or Division 40 of the ITAA 1997? Answer 2 No. This ruling applies for the following periods Income year ending 30 June 20xx The scheme commenced on 1 July 20xx
Background Company A (the Trustee) is trustee for the Trust (the Trust). The Trust was established by deed in 19xx. The Trust is part of a wider group of entities which comprise the Group (the Group). The Trustee of the Trust is contemplating executing a deed of variation (Deed of Variation) which will change a number of the clauses of the Trust Deed. The Trustee has the appropriate power to enable the proposed amendments to be made under the Trust Deed. The Proposed Deed of Variation is to prevent any foreign person from being a potential beneficiary of the Trust. The proposed amendments are being made to remove the Trust from the inadvertent application of the following legislative regimes to the Trust as a foreign entity: • Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) • State Revenue Laws
Income Tax Assessment Act 1997 section 6-5 Income Tax Assessment Act 1997 section 8-1 Income Tax Assessment Act 1997 Division 40 Income Tax Assessment Act 1997 section 104-55 Income Tax Assessment Act 1997 section 104-60 Detailed Reasoning Unless otherwise stated, all legislative references are to the Income Tax Assessment Act 1997 CGT event E1 happens if a trust is created over a CGT asset by declaration or settlement - subsection 104-55(1). CGT event E2 happens if a CGT asset is transferred to an existing trust - subsection 104-60(1). Case law guidance on when amendments to an existing trust instrument may lead to the creation of a new trust by declaration or settlement can be found in Federal Commissioner of Taxation v. Commercial Nominees of Australia Ltd [2001] HCA 33; 2001 ATC 4336;