Description of arrangements covered in TA 2019/2
The arrangements under review by the ATO typically involve the Transferring Trust agreeing to dispose of an asset to a purchaser (for the purchase price) by way of the following steps:
- The Receiving Trust is settled with nominal funds and issued units. Both the Receiving Trust and the Transferring Trust have the same beneficiaries with the same entitlements and no material discretionary
- The Transferring Trust transfers the asset to the Receiving Trust for the purchase price and makes a capital gain.
- The trusts both choose to obtain the Subdivision 126-G roll-over. Consequently, the Transferring Trust disregards the capital gain it makes on transferring the asset to the Receiving Trust.
- The acquisition results in the Receiving Trust owing the Transferring Trust an amount equal to the purchase price. This may be in the form of a promissory
- The purchaser subscribes for a large number of new units in the Receiving Trust equal in value to the purchase price. The Receiving Trust uses those subscription funds to repay the amount owing to the Transferring
- The purchaser acquires the original units in the Receiving Trust for typically nominal consideration and replaces the existing trustee with an entity it
These steps may be implemented in close succession or they may be structured in stages as part of a broad scheme.