A trust split usually involves a family trust. A common reason given for ‘splitting’ the trust is to allow different parts of the family group to have autonomous control of their own part of the trust fund.

A ruling issued in December 2019 confirms the Commissioner’s view that the split will create a new trust (as the trustee has new personal obligations and new rights have been annexed to property) and trigger a capital gains tax event, which could potentially give rise to a taxable capital gain.

The ATO’s approach applies to trust split arrangements entered into on or after 11 July 2018.