Private ruling: CGT - small business restructure rollover
Date of advice: 5 October 2021
Published: December 2021
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does the proposed transfer of land from a discretionary trading trust to a new discretionary trust qualify for relief under subdivision 328-G of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. The proposed restructure and transfer of land from a discretionary trading trust(s) to a new discretionary trust(s) qualifies for CGT Rollover under the subdivision 328-G of the Income Tax Assessment Act 1997 (ITAA 1997). It is considered that the transaction is a genuine restructure of the business.

Relevant facts and circumstances: The XXXX Trust and The XXXX Trust both are discretionary trusts (transferors). The two discretionary trusts are in a partnership. XXXX and XXXX are siblings. Trustees and the appointers of The XXXX Trust are XXXX and the spouse XXXX. Trustees and the appointers of The XXXX Trust are XXXX and the spouse XXXX. The discretionary trusts own XXXX acres near XXXX, Australia, under multiple titles. The discretionary trusts (transferors) do not carry on a business; however, the land has been used on a continual basis in a business connected to the taxpayer discretionary trusts since the date of purchase. XXXX Land There are two businesses that utilise the XXXX land. One of the businesses that utilises the XXXX land is a discretionary trust with a corporate trustee. The appointor of this trust is XXXX. The trustee of this trust is a company. The shareholders of the corporate trustee are XXXX and the spouse XXXX with XX% share each. The directors of the corporate trustee are XXXX and the spouse XXXX. This trading trust has a family trust election in place with XXXX as the specified individual. The second business that utilises the XXXX land is also a discretionary trust with a corporate trustee. The appointor of this trust is XXXX. The trustee of this trust is a company. The shareholders of the corporate trustee are XXXX and the spouse XXXX with XX% share each. The director of the corporate trustee is XXXX. This trading trust has a family trust election in place with XXXX as the specified individual. The businesses carried on by the two discretionary trusts are solely for the benefit of the two siblings and their respective families. The business activities of both discretionary trusts are livestock farming and primary production growing. The discretionary trusts are both financially dependent on the land and the brothers are financially dependent on the trust business and act in concert to ensure that the trusts are run in such a way as to meet their financial requirements. The proposal is that the land near XXXX owned by the two discretionary trusts will be transferred to new discretionary trust(s) with a corporate trustee in 20XX financial year. The partnership and two trading discretionary trusts had an aggregated turnover of less than XX million for the previous year and will have an aggregated turnover of less than XX million in the current year. The land owned by the discretionary trusts will be transferred to new discretionary trusts with a corporate trustee. The XXXX Trust has a family trust election in place with XXXX as the specified individual. The XXXX Trust has a family trust election in place with XXXX as the specified individual. All entities party to the restructure are Australian Residents for tax purposes. The land will continue to be used by the partnership and two discretionary trusts in the carrying on of its business activities. The purpose of applying the restructure rollover is to enable additional options with financiers to be negotiated on better terms and with less security being provided. This may in turn lead to financing with alternative financiers as opportunities arise. Both the transferors and each transferee will choose to apply the roll-over in relation to the assets transferred under the transaction.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 328-430 | Income Tax Assessment Act 1997 Section 328-440 | Income Tax Assessment Act 1997 Section 328-125 | Income Tax Assessment Act 1997 Section 328-130