Trust resettlements and CGT

Capital Gains Tax and resettling trusts deeds

The ATO has effectively confirmed that a trust deed can be varied without the trust being ‘resettled’ and causing Capital Gains Tax (CGT) problems.

More specifically, they state that there should be no CGT consequences if the trustee validly exercises a power contained within the trust deed to change the terms of the trust (or the deed is varied with the approval of a relevant court), unless:

  • the change causes the existing trust to terminate and a new trust to arise for trust law purposes; or
  • the effect of the change leads to a particular trust asset being subject to separate rights and obligations, giving rise to the conclusion that the relevant asset has been settled on terms of a different trust.