Consequences of the roll-over for the trusts
Broadly, the consequences of the roll-over for the ‘Transferring Trust’ is that any capital gain or loss made in relation to the transfer of the asset is disregarded. Refer to S.126-240(1). Furthermore, roll-over relief is also available with respect to a balancing adjustment amount that arises on the transfer of a depreciating asset (refer to Item 5 of the table in S.40-340(1)).
Broadly, the consequences of the roll-over for the ‘Receiving Trust’ are as follows:
- The first element of the asset’s cost base (or reduced cost base) is equal to the transferring trust’s cost base (or reduced cost base) just before the transfer time – refer to S.126-240(2).
- Pre-CGT assets retain their status in the receiving trust; all other assets are acquired by the receiving trust when the trust is created, or the asset is transferred – refer to S.109-5.
- For purposes of the general CGT discount, the receiving trust’s ownership period of the asset includes the period it was owned by the transferring trust – refer to Item 1, S.115-30(1).
Consequences of the roll-over for beneficiaries
Under S.126-245, the cost base of a beneficiary’s interests is generally impacted as follows:
- Cost base of interests in the transferring trust – The first element of the cost base (or reduced cost base) of each interest in the transferring trust, just after the transfer time, will be a proportion of its cost base (based on its market value) just before the transfer time.
- Cost base of interests in the receiving trust – Broadly, this is such amount that the sum of the cost base (or reduced cost base) of the beneficiary’s interests in each trust just after the transfer time, reasonably approximate the total of those interests just before the transfer time.
Furthermore, beneficiaries are deemed to have acquired their interests in the receiving trust at the transfer time. However, if the interests in the transferring trust were acquired pre-CGT, the corresponding interests in the receiving trust are also pre-CGT.
In addition, for purposes of the general CGT discount, the ownership period of membership interests in the receiving trust include the period of corresponding ownership in the transferring trust. Refer to Item 1 of the table in S.115-30(1).