We strongly recommend that you seek independent legal advice in relation to the potential resettlement of the trust and
satisfy yourself in relation to the issues below.
The existence of a trust generally cannot be established, or the trust administered, without a trust deed and the absence
of a trust deed presents particular difficulties when it comes to proving the trust. The existence, and proper running, of
the trust require trust deeds to somehow be adopted or replaced. In practice, where it can be conclusively established
that the trust has been validly established, this may be done by:
(a)
adopting a replacement trust deed; and
(b)
seeking a declaration from a court of the validity of the terms of the trust.
We recommend that once a replacement trust deed is supplied to you, that you take steps to obtain a court declaration
in respect of its validity.
In any case, the trustee must establish that the trust was validly established and prove the terms of the trust as they
existed at the date of establishment. It is essential that the trustee contact the person responsible for the preparation
of the trust and obtain details of the original instructions and a copy of the trust deed. In the absence of the latter, the
trustee must obtain a copy of the form of trust deed generally in use at the time by the person who prepared it. Together
with such evidence of the existence and terms of the trust as the trustee possesses, the trustee must then establish, as
closely as is possible, the terms of the trust as they existed at its creation.
Whether or not Acis established the trust or prepared the original trust deed, we cannot verify the existence of the trust
or the terms of the original. As such the form supplied by Acis is a form used by Acis at or about the time of the date of
the original trust deed as supplied by you. It may not, therefore, represent an accurate version of the original trust deed.
The ATO, stamp duty authorities or a court may find that the preparation of a replacement trust deed, and reliance on
it by a trustee, in circumstances where the trust cannot be shown to have been validly established or where the terms
of the trust alleged cannot be conclusively determined, constitutes a new declaration of trust or the resettlement of the
original trust. Generally, to do so, the relevant body must show that the trust was not properly established or that the
trust deed differs from the original to such an extent, that it redefines the trust relationship and gives rise to a new trust.
Such a finding will attract CGT (event E1 and/or E2) and/or stamp duty liabilities. Those liabilities may be considerable
depending on the trust’s assets. Such a finding may also result in the loss of carry forward losses in the trust (if any). The
onus is on the trustee rather than the ATO, stamp duty authorities or a court to establish that it is not a resettlement
or a new trust.
Where the trustee can conclusively show that the trust was properly established, the terms of a replacement trust deed
may be argued to differ from the original simply because it cannot be shown that they are identical, or that terms and
conditions in the replacement trust deed were not in common use at the date of the original deed. As such, the trustee
must be in a position to produce evidence of:
(a)
the valid creation of a trust; and
(b)
the original terms of the trust as contained in the original trust deed.
(c)
the original terms of the trust as contained in the original trust deed.
In each case, the outcome will depend on the unique circumstances of the particular trust.
In order to determine whether the replacement trust deed will constitute a new trust or trigger a resettlement of an existing
trust, it would be necessary to obtain a private ruling from the ATO and a determination from the stamping authorities to put
the issue beyond doubt. This ideally should be done before the replacement is adopted.
You should also note that the stamp duty authority in your State may request further details to confirm any claim for an
exemption from dusty including:
(a)
full details of the Trust’s assets and their value;
(b)
evidence of stamping at the time of acquisition of those assets; and
(c)
whether any trust assets have been distributed to beneficiaries.
IMPORTANT NOTE: if the trust deed or a copy of it is subsequently located after the execution of a replacement trust deed, the
original trust deed must be used as the correct trust deed to the exclusion of the replacement.