Proposed Amendments to the Tax Laws

The Government has introduced a Bill into Parliament which seeks, among other things, to:

• remove the CGT trust cloning exception and providing a limited CGT relief when transferring assets between two fixed trusts;
• update the list of deductible gift recipients to include two new organisations and change the name of one organisation; and
• exempt the Income Recovery Subsidy payments to North Western Queensland flood victims from income tax.

Proposed CGT–related amendments

The Bill seeks to repeal the ‘trust cloning’ exception to two CGT events. Currently, the exception ensures that a CGT event does not happen if a trust is created over a CGT asset or if the asset is transferred to an existing trust where the beneficiaries and terms of the transferring trust and receiving trust are the same.

The Bill also seeks to clarify that a mere change of trustee does not trigger a CGT event even if there is a change in the person who holds the office of trustee.
Further, the Bill seeks to provide an optional CGT rollover for the transfer of assets between ‘fixed’ trusts. The effect of the rollover will be to defer the making of any capital gains or losses in respect of the transfer.

Broadly, the rollover will be available if:

• the trustees of the transferring trust and receiving trust both choose the rollover; and
• the same beneficiaries have the same interests in both trusts.

Income Recovery Subsidy

The Bill proposes to exempt the Income Recovery Subsidy for the North Western Queensland floods from income tax. The Bill also proposes to ensure the subsidy is not taken into account when calculating a taxpayer’s entitlement to certain tax offsets (eg dependant tax offset).