You want to vary your client's trust deed. But have you actually read the variation clause?
That sounds basic. But the case law on invalid trust variations tells you how often this step is missed. Not every variation clause lets you do what you think. And if the variation exceeds the power, you may not just have an invalid amendment. You may have created a new trust.
The Variation Power Is Not a Blank Cheque
The scope of a variation clause depends on its language, read in context of the deed as a whole. In Mercanti v Mercanti (2016) WASCA 206, the WA Court of Appeal drew a critical distinction between two deeds: one permitting variation of “the trusts hereinbefore provided” and another covering “the Trust's terms and conditions.” The first was too narrow to cover the office of Appointor “trusts” referred only to the trusts created by the deed, not administrative roles. The second was broad enough.
That single word “hereinbefore” determined whether the trustee could change the appointor. Jenkins v Ellett [2007] QSC 154 reached the same conclusion: the power to vary “trusts declared” did not extend to the schedule where the Principal was defined.
If the power only covers “trusts, powers and provisions,” it may not reach definitions, schedules or administrative roles. Mercanti makes clear these are not interchangeable.
Resettlement: The Hidden CGT Trigger
Even where the power is broad enough, the next question is whether the change triggers resettlement. In Commissioner of Taxation v Clark [2011] FCAFC 5, the Full Federal Court held relying on Commercial Nominees [2001] HCA 33 that continuity of the trust estate does not require continuity of property or beneficiaries, provided changes were contemplated by the deed.
The ATO accepted this in TD 2012/21: where a variation is supported by a power in the deed, no resettlement arises. If it falls outside the power: deemed disposal of all CGT assets (CGT event E1), loss of carried-forward losses, and potential duty on the “new” trust acquiring assets.
What Practitioners Should Check
1. Does the variation clause cover trusts, powers AND provisions? Does it reach schedules and definitions?
2. Is appointor consent required — must it be “prior written approval” (separate document before the variation) or “written consent” (given simultaneously)?
3. Could the change alter the substratum of the trust? The equitable doctrine of fraud on a power is a live constraint (Duke of Portland v Topham [1864] 11 HLC 32).
4. If the deed is missing, a deed of confirmation may suffice but for significant assets, a court application may be needed (Jowill Nominees v Cooper [2021] SASC 76).
The trust deed is the foundation. If you do not understand the variation power before you exercise it, you are building on sand.
What is the most unexpected limitation you have found in a variation clause?
General information only. This note was written as at 2 March 2026 and the law may have changed since. It is not legal or tax advice, does not take account of your circumstances, and must not be relied upon as a substitute for advice on your own matter.