Potential CGT traps for land development through the use of a trust by joint venturers

The recent Full Federal Court decision of Taras Nominees Pty Ltd as Trustee for Burnley Street Trust v Commissioner of Taxation1 as identified the manner and operation of the capital gains tax (CGT) regime in the situation where a number of adjoining landholders pool and develop their land through a joint venture, with the objectives of that joint venture conducted through a trust. The Full Federal Court decision adds to the current knowledge and application of how CGT events E1 and A1 will apply to the settlement of a new trust, where the respective portions of land is transferred to the trustee and the trustee is then empowered to develop that land. The result of the court judgment is that taxpayers and their advisers need to be wary of entering such arrangements and be aware of the potential CGT implications.