On 24 October 2012, the ATO released Taxation Determination
2012/21 in response to the High Court refusing special leave to
appeal the decision of Commissioner of Taxation v Clark
 FCAFC 5 (Clark's Case).
Prior to the release of this new Taxation Determination, there
was considerable uncertainty in respect of when an amendment to a
Trust Deed caused a resettlement.
For stamp duty and capital gains tax purposes, a resettlement is
treated as if the entire trust assets are transferred to a new
trust thereby (usually) creating a significant tax liability.
The ATO has now confirmed its views that a resettlement will
generally not occur:
in most cases, where a Trust Deed is varied pursuant to a valid
exercise of a power contained in the Trust Deed or by a Court Order
(including by the addition of new beneficiaries and the removal of
where the terms of the trust are varied in a situation to
expand the powers of investment for the trust (for example a trust
established for the purposes of investing in the stock market by
resolution, expands its purposes to invest in real property as
where a Trust Deed is varied to insert a definition of net
income, income characterisation clauses and Bamford prompted
Taxation Determination 2012/21 further provides examples of
situations where the ATO will consider that a resettlement has
occurred. These examples are generally limited to situations where
the trust obligations that attach to trust assets change in such a
manner that the assets have commenced to be held on the terms of a
RevenueSA's position, as noted in its Revenue Ruling SDA003,
is that "an instrument by which a trustee of a discretionary
trust varies a Trust Deed to add a new beneficiary in respect of
capital, that is a potential beneficial interest in relation to
property subject to the trust, is chargeable with ad valorem duty
on the net value of the trust property." This
is in contrast to the ATO's position and it is yet to be seen
whether RevenueSA will revise this position in light of Clark's
Case and the Taxation Determination.
Notwithstanding that this new Taxation Determination is
encouraging to taxpayers, we continue to recommend that caution
should be exercised when considering amending a trust deed, and to
do so only when necessary. This is particularly relevant given the
legislation governing the taxation of trusts is set to be
substantially rewritten and is intended to take effect from 1 July
The rewriting of the trust taxation provisions may make hastily
made current year Trust Deed amendments superfluous as you may need
to re-amend when the new provisions are enacted. We recommend
adopting a wait and see approach before taking steps to amend a
Trust Deed other than when necessary.
However where a trustee needs to stream income (capital gains or
share dividends) in the current financial year and a streaming
power is not currently contained in the Trust Deed, it is necessary
to amend the Trust Deed to include this power. This is the most
common amendment to Trust Deeds that we encounter and should be
performed if the trustee requires the ability to stream income.
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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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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