Changing a Trust without triggering a CGT payment
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.
Chris Beeny
Partner
Phone: 03 9288 0555
Chris is a Partner in the Maddocks Commercial group. His principal areas of practice are superannuation, trusts, taxation, general corporate advice, company secretarial law and the law of charities and non-profit organisations. He also has extensive experience in private client work — wills and estates.
A special focus for Chris has been superannuation, where Chris has been involved in related tax, trust, Corporations Act and regulatory advice for more than 17 years and is recognised as one of Australia's leading legal practitioners.
Chris's professional memberships include:
- Member of the Commercial Law Section of the Law Council of Australia
- Member of the Superannuation Committee of the Law Council of Australia
- Founding member and current Chairperson, Superannuation Committee of the Law Institute of Victoria
- Member, International Pension and Employee Benefits Law Association
- Fellow, Taxation Institute of Australia
- Member Association of Superannuation Funds of Australia
- Member Australian Institute of Superannuation Fund Trustees.
As well as writing numerous articles and speaking at many conferences, Chris is a joint author of "Superannuation: A Practical Approach" (Leo Cussen Institute), a contributor on superannuation topics to "The Employment Factbook" (Centre for Professional Development) and a member of the Editorial Panel of "Australian Superannuation Law Bulletin" (Prospect Media).
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