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September 2005
Superannuation & Tax changes. Legislation update
Changing a Trust without triggering a CGT payment
New ASIC guidance on financial product advice

Maddocks The legal information and commentary on this site is general only. Documents ordered through Cleardocs affect the user‘s legal rights and liabilities. To assess their suitability for the user, legal, accounting and financial advice must be obtained.

Resources » ClearLaw legal bulletin » Trusts » Changing a Trust without triggering a CGT payment
Lawyer in Profile
Julian SmithJulian Smith
Senior Associate
Phone: 03 9288 0555

Julian's areas of practice include:

  • trusts;
  • company law;
  • corporate restructuring;
  • sale and acquisitions of businesses and companies;
  • superannuation; and
  • financial services.

He has experience in drafting various types of commercial agreements, trust deeds and corporate governance documents. He also advises extensively on companies law, financial services (and licensing) and superannuation matters.

Julian is studying his Masters of Law at Melbourne University and recently addressed an ICAA conference on "SMSFs: The Virtue of A Good Deed".

Maddocks
When changing a trust deed, it is important to consider whether the change will give rise to any capital gains tax (CGT) implications for income tax purposes.

In particular, you should be careful that when changing the deed you do not inadvertently cause the existing trust to come to an end and to be replaced by a new trust (referred to as a "resettlement"). Problems arise because a resettlement causes a disposal and re-acquisition of the trust property. And CGT may apply.

The question of whether a change of a trust deed results in a resettlement for income tax purposes is a question of fact and degree. However, the Australian Taxation Office has issued a Statement of Principles in this regard setting out the circumstances in which it considers that there will be a resettlement of a trust.

For example, the following variations are considered sufficiently fundamental to cause a resettlement:

  • redefining a group of beneficiaries, asdistinct from changing the membership of an existing group; and
  • fundamental changes to the terms of atrust. For example, converting a discretionary trust to a unit trust.

These changes are distinguished from purely procedural changes such as a change of trustee.

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