On 6 September 2011, the High Court refused the
Commissioner's application for special leave to appeal the
decision of the Full Federal Court in FCT v Clark and Anor
 FCAFC 5 (Clark). As a result, the
Commissioner withdrew its 'Creation of a new trust –
Statement of Principles August 2001' (Statement of
Principles) on 20 April 2012.
Where to from here? Substratum of the trust
Importantly, the withdrawal of the Statement of Principles is
not the end of the resettlement issue. The underlying resettlement
principle must be considered with any variation.
Irrespective of the Commissioner's view in the Statement of
Principles, resettlement cases have focussed on the concept of a
trust having a substratum. In Re Ball's Settlement
 1 WLR 899, Megarry VC noted:
'If an arrangement changes the whole substratum of the
trust, then it may well be that it cannot be regarded as merely
varying the trust.'
In Lock v Westpac Banking Corporation  25 NSWLR
593, the Court confirmed the substratum is determined as a matter
of construction of the deed, having regard to the surrounding
In FCT v Commercial Nominees of Australia Ltd 
HCA 33 (Commercial Nominees), and again
in Clark, the Courts confirmed continuity needs to be considered in
the circumstances of the fund. In Commercial Nominees, the
Court noted that a superannuation fund, by its nature, is expected
to undergo change. In Clark, Dowsett J noted that the unit
trust in question did contemplate the possibility of change.
These cases indicate that provided a change is made pursuant to
a power under the trust deed, and the changes do not go outside the
purpose of the trust, they should not result in a resettlement.
Where a trust has a specific purpose, caution should be
exercised. In the meantime, contact us if you require information
regarding trust deed amendments, including review and amendments of
trust deeds to deal with the definition and determination of
Further guidance from the Commissioner?
The Commissioner has confirmed the Statement of Principles will
not be replaced, with the Commissioner instead to release a
Taxation Determination (TD) focussing on CGT event
E1 (creating a trust over CGT assets). It is likely this TD will
provide examples of amendments that do not trigger CGT event
For the time being, it is a case of watch this space, and we
will provide a further update once the TD is released.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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