The Subdivision 126-G roll-over was introduced to address concerns regarding 'trust cloning', a practice where an existing trust is replicated with the same terms and beneficiaries, and assets are transferred between them. Trust cloning serves various purposes like asset protection, succession planning, or division of assets due to relationship changes.
From a tax perspective, creating a trust over a CGT asset triggers CGT event E1, while transferring an asset to an existing trust triggers CGT event E2.
Before November 1, 2008, a 'trust cloning exception' allowed CGT-free transfers to cloned trusts. But misuse led to its abolition from November 1, 2008. Since then, there's been no specific CGT roll-over for asset transfers between discretionary trusts. Taxpayers often rely on Small Business CGT concessions for relief, if eligible.
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