Private ruling: Small business CGT roll-over
Date of advice: 15 April 2024
Published: 3 June 2024
Ruling period: Year ending 30 June 2024
Date scheme commenced: 1 July 2023

Ruling: Q1: Can an interest of a default beneficiary in a discretionary trust that was acquired in return for a transfer of a CGT asset to the trust become a replacement asset for the purpose of the application of the small business capital gains tax roll-over under Subdivision 152-E of the Income Tax Assessment Act 1997 ? | A1: Yes. The small business rollover allows you to defer the capital gain made from a capital gains tax (CGT) event if you acquire one or more replacement assets and satisfy certain conditions. For you to obtain a rollover, you are required to acquire a replacement asset within a period starting one year before and ending two years after the date of disposal of the asset for which you are claiming the rollover. The Commissioner may extend those time periods. By becoming a default beneficiary in a discretionary trust, you will acquire an interest in a trust. An interest in a trust is an eligible replacement asset for the purposes of the small business roll-over.

Relevant facts and circumstances: You hold units in a unit trust. A planned restructure involves the transfer of your units in the trust to a newly established discretionary trust where you will become a default beneficiary and CGT concession stakeholder in the trust. You satisfy the basic conditions for the application of the small business roll-over. Your future interest in the trust will become your active asset.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 104-185(1) | Income Tax Assessment Act 1997 section 104-197 | Income Tax Assessment Act 1997 section 104-198 | Income Tax Assessment Act 1997 Subdivision 152-E