This TD, released Wed 24.10.2012, provides that CGT event E1 or E2 in the ITAA 1997 does not 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 unless either: (a) the change causes the existing trust to terminate and a new trust to arise for trust law purposes, or (b) 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 Determination was originally released as Draft TD 2012/D4 and is slightly different in that the Draft stated that CGT event E1 or E2 does not happen “if, pursuant to a valid exercise of a power contained within the trust’s constituent document, the terms of the trust are changed”, unless the “amendment causes the trust to terminate for trust law purposes, or the effect of the amendment is 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”.
Subject to the case where the views expressed in this Determination are less favourable to a taxpayer than the Commissioner’s previous practice set out in “Creation of a new trust – Statement of Principles”, it does not apply in respect of changes to the terms of a trust pursuant to a valid exercise of a power contained within the trust’s constituent document made before 20 April 2012. Otherwise, it applies both before and after its date of issue.
[LTN 206, 24/10]