Private ruling: Small business restructure roll-over
Date of advice: 12 August 2025
Published: 20 October 2025
Ruling period: 1 July 202x to 30 June 202x
Date scheme commenced: 1 July 202x

Ruling: Q1: Will the proposed transfer of the Land from Company X to Y Trust satisfy the alternative test in section 328-440 of the Income Tax Assessment Act 1997 (ITAA 1997) to meet the ultimate economic ownership requirement in paragraph 328-430(1)(c) of the ITAA 1997? | A1: Yes.

Relevant facts and circumstances: It is proposed that Company X will transfer the Land to Y Trust. Company X owns the Land. Company X is an Australian resident. W Trust is a discretionary trust that conducts the primary production business on the Land. V Family Trust owns all of the shares in Company X. V Family Trust has made a family trust election (FTE) nominating Individual X as the specified individual for the purposes of section 272-80 of Schedule 2F of the Income Tax Assessment Act 1936 (ITAA 1936). The appointor of Y Trust is Individual X. The trustee of the Y Trust is a company incorporated in Australia. The sole director of Y Trust is Individual X. The shareholders of Y Trust are Individual X and their spouse. Y Trust has made a FTE nominating Individual X as the specified individual for the purposes of section 272-80 of Schedule 2F of the ITAA 1936. Y Trust is a resident trust for CGT purposes.

Relevant legislative provisions: Income Tax Assessment Act 1936 Schedule 2F | Income Tax Assessment Act 1936 section 272-90 | Income Tax Assessment Act 1997 Subdivision 328-G | Income Tax Assessment Act 1997 section 328-430 | Income Tax Assessment Act 1997 subsection 328-430(1) | Income Tax Assessment Act 1997 section 328-440 Anti-avoidance rules | Part IVA of the ITAA 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select 'Part IVA: the general anti-avoidancerule for income tax'.

Reasons for decision: Summary: The proposed transfer of the Land to Y Trust will satisfy the alternative test in section 328-440 of the ITAA 1997 to meet the continuity of ultimate economic ownership requirement in paragraph 328-430(1)(c). | Detailed Reasoning - Detailed reasoning: A roll-over under Subdivision 328-G of the ITAA 1997 is available in relation to an asset that, under a transaction, an entity (the transferor) transfers to one or more other entities if certain requirements are satisfied (subsection 328-430(1)). One of these requirements is that the transaction must not materially change which individual has, or which individuals have, the ultimate economic ownership of the asset, and if there is more than one such individual - each such individual's share of that ultimate economic ownership (paragraph 328-430(1)(c) of the ITAA 1997). In most cases the nature of a discretionary trust will mean that it is not possible to determine the ultimate economic owner of its assets before or after they have been transferred and thereby to show that the ultimate economic ownership has not been materially changed. As such, a transfer of assets from or to a discretionary trust will generally not meet the requirements for ultimate economic ownership in paragraph 328-430(1)(c) of the ITAA 1997. Where it is not possible to demonstrate that ultimate economic ownership of the assets has been maintained, an alternative ultimate economic ownership test is available to discretionary trusts. Section 328-440 of the ITAA 1997 contains an alternative ultimate economic ownership test for discretionary trusts. Section 328-440 states that for the purposes of paragraph 328-430(1)(c), a transaction does not have the effect of changing the ultimate economic ownership of an asset, or any individual's share of that ultimate economic ownership, if the requirements in that section are satisfied. Section 328-440 of the ITAA 1997 provides: For the purposes of paragraph 328-430(1)(c), a transaction does not have the effect of changing the ultimate economic ownership of an asset, or any individual's share of that ultimate economic ownership, if: (a) either or both of the following applies: (i) just before the transaction took effect, the asset was included in the property of a non-fixed trust that was a family trust; (ii) just after the transaction takes effect, the asset is included in the property of a non-fixed trust that is a family trust; and (b) every individual who, just before the transfer took effect, had the ultimate economic ownership of the asset was a member of the family group (within the meaning of Schedule 2F to the Income Tax Assessment Act 1936 ) relating to the trust or trusts referred to in paragraph (a); and (c) every individual who, just after the transfer takes effect, has the ultimate economic ownership of the asset is a member of that family group. Under the proposed transaction, Company X will transfer the Land to Y Trust, a discretionary trust that has made a FTE. Subparagraph 328-440(a)(ii) of the ITAA 1997 will be satisfied, as just after the proposed transaction takes effect, the Land will be included in the property of a non-fixed trust that is a family trust. The family group (within the meaning of Schedule 2F to the ITAA 1936) just before the proposed transfer will be members of the family group relating to Y Trust. As such, paragraph 328-440(b) of the ITAA 1997 will be satisfied. The family group of Y Trust will, just after the proposed transfer, include all the individual beneficiaries of Y Trust. The Y Trust has made a FTE with Individual X as the 'test individual'. As all these individuals are members of that same family group, paragraph 328-440(c) of the ITAA 1997 will be satisfied. As a result, proposed transfer of Land will satisfy the alternative test in section 328-440 of the ITAA 1997 to meet the continuity of ultimate economic ownership requirement in paragraph 328-430(1)(c).