In 2001 the ATO issued a Statement of Principles in relation to trust resettlements but have steadfastly refused to formalise this into a public ruling.
It is widely accepted that many of the positions taken by the ATO in the Statement of Principles are not correct.
However, the fact that it is still in circulation and commonly relied upon by the ATO creates significant uncertainty for clients and advisors when considering amendments to trust deeds.
The consequences of inadvertently triggering a trust resettlement can be significant, as the effect of a resettlement is that the initial trust comes to an end and a new trust is created. This will trigger CGT events, and a deemed disposal of trading stock, depreciable plant etc.
There is some UK and Australian case authority that the mere extension of the vesting date of a trust will not be a resettlement (re Holmden's Settlement Trusts [1968] 1 All ER 148 and Stein v Sbymore Holdings [2006] NSWSC 1004).
The ATO have issued some conflicting private rulings, in some cases accepting that an extension of settlement date will not be a resettlement and in other cases arguing that it does trigger a resettlement (e.g., PBR 48165 and PBR 34051).
Cooper Grace Ward recently applied for a private ruling in relation to a proposed variation of a trust deed which was designed to extend the vesting date of the trust by 20 years.
The ATO issued a positive binding ruling in respect of that application.
The ATO indicated that a significant factor which led them to issue the favourable ruling was that no other changes were proposed to the trust deed.
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.