Private ruling: Restructure roll-over
Date of advice: 3 December 2025
Published: 27 January 2026
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does the proposed transfer of land from the Individuals to the Trust qualify for roll-over relief under Subdivision 328-G of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: The Partnership carries on a business (the Business). The Partnership consists of X individuals as equal partners. The Trust was established in 19XX. Individual 1 is the sole appointor and guardian of the Trust. The trustee of the Trust isa corporate entity. The shareholders and directors of the corporate entity are the X individuals and some of their children. The Trust does not carry on any business activities. The Trust and all partners in the Partnership are residents for income tax purposes. The Partnership carries on the Business across 2 neighbouring properties (Property A and Property B). 2 of the X individuals (the Individuals) are the joint owners of Property A. Property A was inherited partially before 20 September 1985 and partially after 20 September 1985. The Trust owns Property B. It was acquired in 20XX from the Individuals. The Individuals and the Trust allow the Partnership to carry on the Business across the 2 properties. There are no written lease agreements. The Partnership pays all outgoings and costs relating to both properties. The Trust made a family trust election (FTE) pursuant to Schedule 2F of the Income Tax Assessment Act 1936 (ITAA 1936) on 1 July 20XX naming one of the Individuals as the specified individual. The FTE remains in force as at the date of this ruling and is expected to remain in force at the time of a proposed transaction in 20XX income year. The X individuals are beneficiaries of the Trust and are members of the specified individual's family as defined by section 272-95 of Schedule 2F of the ITAA 1936. For the 20XX and 20XX income years, the Trust distributed 50% of its income to each of the Individuals. Minutes from XXX 20XX show a resolution by the corporate trustee for the Trust to distribute 50% of trust income to the Individuals for the 20XX income year. The Partnership had a turnover of less than $10 million for the 20XX income year. The X individuals do not carry on any other business activities outside that of the Partnership. The Proposed Transaction The Partnership will transfer the Business to the Trust. The Individuals will transfer Property A to the Trust. The aggregated turnovers of the Partnership and the Trust are expected to be less than $10 million for the 20XX income year. You have stated the purpose of the Proposed Transaction is: • to create a more efficient structure for managing the Business administratively, operating efficiently and maximising productivity while reducing costs. Having a corporate trustee will allow better strategic management by the broader family involved in the Business. • to enable additional options and efficiency regarding external financial funding. • to provide additional asset protection to the individuals that currently own the properties and the Business. The partners want to protect their personal, non-business assets from any potential liabilities or losses that could arise from operating the business. All parties to the Proposed Transaction will choose to apply a roll-over under Subdivision 328-G of the ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1936 Schedule 2F section 272-70 | Income Tax Assessment Act 1936 Schedule 2F section 272-80 | Income Tax Assessment Act 1936 Schedule 2F section 272-95 | Income Tax Assessment Act 1997 subsection 152-10(1A) | Income Tax Assessment Act 1997 paragraph 152-10(1A)(a) | Income Tax Assessment Act 1997 paragraph 152-10(1A)(b) | Income Tax Assessment Act 1997 paragraph 152-10(1A)(c) | Income Tax Assessment Act 1997 paragraph 152-10(1A)(d) | Income Tax Assessment Act 1997 subsection 152-10(1AA) | Income Tax Assessment Act 1997 paragraph 152-40(1)(a) | Income Tax Assessment Act 1997 paragraph 152-40(1)(b) | Income Tax Assessment Act 1997 Subdivision 328-G | Income Tax Assessment Act 1997 subsection 328-110(1) | Income Tax Assessment Act 1997 paragraph 328-110(1)(a) | Income Tax Assessment Act 1997 paragraph 328-110(1)(b) | Income Tax Assessment Act 1997 subsection 328-115(1) | Income Tax Assessment Act 1997 subsection 328-115(2) | Income Tax Assessment Act 1997 subsection 328-115(3) | Income Tax Assessment Act 1997 subsection 328-125(1) | Income Tax Assessment Act 1997 paragraph 328-125(1)(a) | Income Tax Assessment Act 1997 subsection 328-125(4) | Income Tax Assessment Act 1997 subsection 328-125(5) | Income Tax Assessment Act 1997 section 328-430 | Income Tax Assessment Act 1997 subsection 328-430(1) | Income Tax Assessment Act 1997 paragraph 328-430(1)(a) | Income Tax Assessment Act 1997 paragraph 328-430(1)(b) | Income Tax Assessment Act 1997 subparagraph 328-430(1)(b)(ii) | Income Tax Assessment Act 1997 subparagraph 328-430(1)(b)(iii) | Income Tax Assessment Act 1997 paragraph 328-430(1)(c) | Income Tax Assessment Act 1997 paragraph 328-430(1)(d) | Income Tax Assessment Act 1997 subparagraph 328-430(1)(d)(ii) | Income Tax Assessment Act 1997 paragraph 328-430(1)(e) | Income Tax Assessment Act 1997 paragraph 328-430(1)(f) | Income Tax Assessment Act 1997 subsection 328-430(2) | Income Tax Assessment Act 1997 section 328-440 | Income Tax Assessment Act 1997 paragraph 328-440(a) | Income Tax Assessment Act 1997 subparagraph 328-440(a)(ii) | Income Tax Assessment Act 1997 paragraph 328-440(b) | Income Tax Assessment Act 1997 paragraph 328-440(c) | Income Tax Assessment Act 1997 section 328-445 | Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision: Summary: Subdivision 328-G allows flexibility for owners of small business entities to restructure their businesses and the way their business assets are held while disregarding tax gains and losses that would otherwise arise. Section 328-430 discusses when a roll-over is available. There are 6 basic conditions in subsection 328-430(1) that must be met, and they are as follows: A roll-over under this Subdivision is available in relation to an asset that, under a transaction, an entity (the transferor ) transfers to one or more other entities ( transferees ) if: (a) the transaction is, or is a part of, a genuine restructure of an ongoing *business; and (b) each party to the transfer is an entity to which any one or more of the following applies: (i) it is a *small business entity for the income year during which the transfer occurred; (ii) it has an *affiliate that is a small business entity for that income year; (iii) it is *connected with an entity that is a small business entity for that income year; (iv) it is a partner in a partnership that is a small business entity for that income year; and (c) the transaction does not have the effect of materially changing: (i) which individual has, or which individuals have, the ultimate economic ownership of the asset; and (ii) if there is more than one such individual - each such individual's share of that ultimate economic ownership; and (d) the asset is a *CGT asset (other than a *depreciating asset) that is, at the time the transfer takes effect: (i) if subparagraph (b)(i) applies - an *active asset; or (ii) if subparagraph (b)(ii) or (iii) applies - an active asset in relation to which subsection 152-10(1A) is satisfied in that income year; or (iii) if subparagraph (b)(iv) applies - an active asset and an interest in an asset of the partnership referred to in that subparagraph; and (e) the transferor and each transferee meet the residency requirement in section 328-445 for an entity; and (f) the transferor and each transferee choose to apply a roll-over under this Subdivision in relation to the assets transferred under the transaction. Note: The roll-over of a depreciating asset transferred in the restructuring of a small business is addressed in item 8 of the table in subsection 40-340(1). The Individuals are the transferors and will be transferring Property A to the Trust. Subsection 328-430(2) provides that roll-over is not available under Subdivision 328-G if the transferor or any transferee is either an exempt entity or a complying superannuation entity. As all the parties to the Proposed Transaction are not either of these types of entities, subsection 328-430(2) does not prevent roll-over being available in this situation. Each requirement in subsection 328-430(1) will now be considered in detail. | Detailed Reasoning - Paragraph 328-430(1)(a) - genuine restructure: Paragraph 328-430(1)(a) requires that the transaction is, or is part of, a genuine restructure of an ongoing business. Whether a transaction is or is part of a 'genuine restructure of an ongoing business' is a question of fact that is determined having regard to all of the circumstances surrounding the restructure. Law Companion Ruling LCR 2016/3 Small Business Restructure Roll-over: genuine restructure of an ongoing business and related matters (LCR 2016/3) provides guidance on whether a transaction will be part of a 'genuine restructure of an ongoing business'. Paragraph 6 in LCR 2016/3 states a 'genuine restructure of an ongoing business' is one that could be reasonably expected to deliver benefits to small business owners in respect of their efficient conduct of the business. It can encompass a restructure of the way in which business assets are held where that structure is likely to have been adopted had the business owners obtained appropriate professional advice when setting up the business. Paragraph 7 of LCR 2016/3 outlines the following features that indicate a transaction is, or is part of, a genuine restructure of an ongoing business: • it is a bona fide commercial arrangement undertaken to facilitate growth, innovation and diversification, to adapt to changed conditions, or to reduce administrative burdens and compliance costs • it is authentically restructuring the way the business is conducted, as opposed to a divestment or a preliminary step to facilitate the economic realisation of assets • the economic ownership of the business and its restructured assets is maintained • the small business owners continue to operate the business through a different legal structure, and • it results in a structure likely to have been adopted had the small business owners obtained appropriate professional advice when setting up the business. However, the restructure of an ongoing business by a business owner is not genuine if it is done in the course of winding down to transfer wealth between generations or realising their ownership interests. A restructure is likely to not be a genuine restructure of an ongoing business if: • it is a preliminary step to facilitate the economic realisation of assets, or takes place in the course of winding down to transfer wealth between generations • it effects an extraction of wealth from the assets of the business for personal investment or consumption • it creates artificial losses or brings forward their recognition • it effects a permanent non-recognition of gain or creates artificial timing advantages, and/or • there are other tax outcomes that do not reflect economic reality. You have advised the Business growing will all continue to be carried on after the Proposed Transaction has been implemented and there are 3 main reasons for its implementation: • to create a more efficient structure for managing the Business administratively. • to enable additional options and efficiency regarding external financial funding. • to provide additional asset protection to the individuals that currently own the properties and the Business. The partners want to protect their personal, non-business assets from any potential liabilities or losses that could arise from operating the Business. As set out in paragraph 7 of LCR 2016/3, these are features that indicate a genuine restructure of an ongoing business is taking place. That is, it is a bona fide commercial arrangement in a structure likely to have been adopted had the owners obtained appropriate professional advice when setting up the business. Moreover, it is an authentic restructuring of the way the business is conducted. There is no indication the Proposed Transaction is occurring in the course of winding down the business, to transfer wealth between generations or the Individuals seeking to realise their ownership interests. It is accepted the Proposed Transaction is a genuine restructure for the purposes of paragraph 328-430(1)(a). | Detailed Reasoning - Paragraph 328-430(1)(b) - small business or related entity: Paragraph 328-430(1)(b) requires the transferor and the transferee to be one or more of the following entities in the income year the Proposed Transaction occurs: (i) a small business entity (ii) an affiliate of a small business entity (iii) connected with a small business entity (iv) a partner in a partnership that is a small business entity. | Detailed Reasoning - Small business entity: Subsection 328-110(1) states: You are a small business entity for an income year (the current year ) if: (a) you carry on a *business in the current year; and (b) one or both of the following applies: (i) you carried on a business in the income year (the previous year ) before the current year and your *aggregated turnover for the previous year was less than $10 million; (ii) your aggregated turnover for the current year is likely to be less than $10 million. The term 'business' is defined in subsection 995-1(1) to include any profession, trade, employment, vocation or calling, but does not include occupation as an employee. Neither of the Individuals carry on any business in their own personal capacity, so they do not meet the requirement in paragraph 328-110(1)(a). Therefore, for the Individuals to be a small business entity, they have to satisfy one of the remaining requirements in paragraph 328-43(1)(b). You have stated that the Individuals are connected with the Trust and will satisfy the requirement in subparagraph 328-430(1)(b)(iii). It therefore has to be established if the Trust is a small business entity in the income year in which the transfer takes place. The Partnership is conducting the Business. After implementing the Proposed Transaction, the Trust will be conducting the Business in the year of the proposed transfer and will satisfy the requirement in paragraph 328-110(1)(a). The next requirement is to determine if the aggregated turnover is less than $10 million in the relevant income year. 'Aggregated turnover' for an income year is defined in subsection 328-115(1) as the sum of the relevant annual turnovers excluding any amounts covered by subsection 328-115(3). The 'relevant annual turnovers' are defined in subsection 328-115(2) as: (a) your *annual turnover for the income year; and (b) the annual turnover for the income year of any entity (a relevant entity ) that is *connected with you at any time during the income year; and (c) the annual turnover for the income year of any entity (a relevant entity ) that is an *affiliate of yours at any time during the income year. The amounts excluded under subsection 328-115(3) are amounts derived from dealings between you and any entities that are connected with you or are your affiliates, or amounts derived from dealings between those entities. You advised the turnover of the Trust is estimated to be $XXX,XXX after the Proposed Transaction takes place. Since the Trust has no connected entities or affiliates its aggregated turnover will be less than the $10 million threshold. Therefore, the requirement in paragraph 328-110(1)(b) will be satisfied. Both requirements in paragraphs 328-110(1)(a) and (b) will be satisfied. Therefore, the Trust will be a small business entity in the 2026 income year. | Detailed Reasoning - Connected with a small business entity: The final requirement is for the Individuals to demonstrate that they are connected with the Trust. [1] Subsection 328-125(1) states an entity is connected with another entity if: (a) either entity controls the other entity in a way described in this section; or (b) both entities are controlled in a way described in this section by the same third entity. In this case, the Individuals need to establish they control the same entity, being the Trust, to satisfy the requirement in paragraph 328-125(1)(a). There are direct control tests in section 328-125 that could apply depending on what type of entity is being tested. For a discretionary trust, the relevant test is set out in subsection 328-125(4), that states: An entity (the first entity) controls a discretionary trust for an income year if, for any of the 4 income years before that year: (a) the trustee of the trust paid to, or applied for the benefit of: (i) the first entity; or (ii) any of the first entity's *affiliates; or (iii) the first entity and any of its affiliates; any of the income or capital of the trust; and (b) the percentage (the control percentage) of the income or capital paid or applied is at least 40% of the total amount of income or capital paid or applied by the trustee for that year. The Individuals are each the 'first entity' referred to in subsection 328-125(4). For the 20XX and 20XX income years, they each received a distribution of 50% of the Trust's income and will therefore both meet the requirement to control the Trust for the 20XX income year under subsection 328-125(4). Subsection 328-125(5) states: An entity does not control a discretionary trust because of subsection (4) if the entity is: (a) an *exempt entity; or (b) a *deductible gift recipient. As neither of the Individuals meet these requirements, subsection 328-125(5) is not applicable, therefore the requirement in subsection 328-125(4) is satisfied. | Detailed Reasoning - Conclusion: The Trust is controlled by the Individuals in accordance with subsection 328-125(4). Consequently, the Individuals are both connected with the Trust via the operation of paragraph 328-125(1)(a). It has been established that the Trust will be a small business entity during the income year, meaning that the transferee to the Proposed Transaction will satisfy the requirement in subparagraph 328-430(1)(b)(i). Since the Individuals are connected with the Trust, the transferors to the Proposed Transaction will satisfy subparagraph 328-430(1)(b)(iii). That is, the transferors to the Proposed Transaction are connected with an entity that is a small business entity. Thus, the requirement in paragraph 328-430(1)(b) will be satisfied. | Detailed Reasoning - Paragraph 328-430(1)(c) - ultimate economic owner: Paragraph 328-430(1)(c) requires the transaction to not have the effect of materially changing which individual has, or which individuals have, the ultimate economic ownership of the assets. Additionally, where more than one individual holds the ultimate economic ownership of the asset, each individual's share of that ownership must not materially change. Where ownership passes to or from a discretionary trust, this requirement would generally not be able to be met. Under ordinary legal concepts, a beneficiary of a discretionary trust is not entitled to income or capital of the trust until the trustee exercises their discretion to distribute income or to make an appointment of capital: Commissioner of Stamp Duties (NSW) v. Buckle (1998) 192 CLR 226. A beneficiary of a discretionary trust only has a right to require the trustee to consider whether or not to exercise their discretion. Instead, a beneficiary of a discretionary trust generally has a 'mere expectancy' in the income or capital of a trust and does not have an interest in possession: Gartside v. Inland Revenue Commissioner [1968] AC 553. However, section 328-440 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 is satisfied if the assets are included in the property of a family trust (as defined in Schedule 2F to the ITAA 1936) either just before or just after the transaction takes / took effect. [2] Additionally, every individual who had the ultimate economic ownership of the asset just before and just after the transfer must be members of the family group (within the meaning of Schedule 2F to the ITAA 1936) relating to the family trust. [3] The phrase 'ultimate economic ownership' is not defined in the ITAA 1997. However, the Explanatory Memorandum to the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016 states: 1.29 The ultimate economic owners of an asset are the individuals who, directly or indirectly, beneficially own an asset. 1.30 Ultimate economic ownership of an asset can only be held by natural persons. Therefore, where a company, partnership or trust owns an asset it will be the natural person owners of the interests in these interposed entities that will ultimately benefit economically from that asset. The Trust is a non-fixed trust for the purposes of section 272-70 of Schedule 2F of the ITAA 1936 and has made a family trust election nominating a specified individual, one of the Individuals, under section 272-80 of Schedule 2F to the ITAA 1936. As Property A will be the property of the Trust immediately after the Proposed Transaction takes effect, this will satisfy the requirement in subparagraph 328-440(a)(ii). Just before the transaction takes effect, the individuals who have the ultimate economic ownership of Property A are the Individuals. Just after the Proposed Transaction takes effect the same individuals will have the ultimate economic ownership of Property A as family group members of the Trust, thereby satisfying the requirements in paragraphs 328-440(b) and (c). Consequently, as the alternative ultimate economic ownership test under section 328-440 will be satisfied, this will satisfy the requirement of paragraph 328-430(1)(c). | Detailed Reasoning - Paragraph 328-430(1)(d) - active assets: Paragraph 328-430(1)(d) requires the CGT asset is, at the time the transfer takes effect: (i) if subparagraph (b)(i) applies - an *active asset; or (ii) if subparagraph (b)(ii) or (iii) applies - an active asset in relation to which subsection 152-10(1A) is satisfied in that income year, or would be satisfied in that income year if paragraph 152-10(1AA)(b) were disregarded; or (iii) if subparagraph (b)(iv) applies - an active asset and an interest in an asset of the partnership referred to in that subparagraph In this case, subparagraph 328-430(1)(b)(iii) applies, therefore the requirement in subparagraph 328-430(1)(d)(ii) must be satisfied. To satisfy this requirement, Property A must be an active asset in relation to which subsection 152-10(1A) is satisfied. | Detailed Reasoning - Active asset: Paragraph 152-40(1)(a) provides that a tangible or intangible CGT asset is an active asset if you own the asset and it is used, or held ready for use, in a business carried on (whether alone or in partnership) by you, your affiliate or another entity that is connected with you. The asset being transferred by the Individuals is Property A, which is used by the Partnership, of which the Individuals are partners, in the course of a carrying on the business operations. Property A is therefore an active asset. | Detailed Reasoning - Subsection 152-10(1A): Subsection 152-10(1A) is satisfied in relation to the CGT asset in the income year if: (a) your affiliate or an entity that is connected with you, is a CGT small business entity for the income year; and (b) you do not carry on a business in the income year (other than in partnership); and (c) if you carry on a business in partnership - the CGT asset is not an interest in an asset of the partnership; and (d) in any case - the CGT small business entity referred to in paragraph (a) is the entity that, at the time in the income year, carries on the business (as referred to in subparagraph (e) 152-40(1)(a)(ii) or (iii) or paragraph 152-40(1)(b)) in relation to the CGT asset. In this case the entity connected with the Individuals is the Trust. As the Trust will be a small business entity whose aggregated turnover in the income year will be less than $2 million it will fall within the definition of a CGT small business entity in subsection 152-10(1AA). Therefore, the requirement in paragraph 152-10(1A)(a) will be satisfied. As the Individuals do not carry on a business other than in the Partnership, the requirement in paragraph 152-10(1A)(b) will be satisfied. Property A is held jointly by the Individuals and is not an interest of the Partnership. The requirement in paragraph 152-10(1A)(c) will be satisfied. The Trust is the entity referred to in paragraph 152-10(1A)(a) and will be carrying on the Business using Property A (the CGT asset) at the relevant time. Therefore, the requirement in paragraph 152-10(1A)(d) will be satisfied. Property A is an active asset in relation to which subsection 152-10(1A) will be satisfied in the 20XX income year. Therefore, the requirement in subparagraph328-430(1)(d)(ii) will be satisfied. | Detailed Reasoning - Paragraph 328-430(1)(e) - residency: Paragraph 328-430(1)(e) requires both the transferor and the transferee to meet the residency requirements outlined in section 328-445. As the Individuals and the Trust are Australian residents for income tax purposes, the requirement in paragraph 328-430(1)(e) will be satisfied. | Detailed Reasoning - Paragraph 328-430(1)(f) - roll-over choice: Paragraph 328-430(1)(f) requires both the transferor and the transferee to choose to apply the roll-over under Subdivision 328-G in relation to the assets transferred under the transaction. The Individuals and the Trust will choose to apply the roll-over in relation to the transfer of Property A. Therefore, the requirement in paragraph 328-430(1)(f) will be satisfied. | Detailed Reasoning - Conclusion: As each of the requirements in subsection 328-430(1) have been met, the Individuals are eligible to choose roll-over relief under Subdivision 328-G in relation to the transfer of Property A to the Trust. [1] Subparagraph 328-430(1)(b)(iii) [2] Paragraph 328-440(a) [3] Paragraphs 328-440(b) and (c)