Private ruling: Restructure roll-over
Date of advice: 4 March 2026
Published: 4 May 2026
Ruling period: Income years ending 30 June 20XX and 20XX

Ruling: Q1: Will section 328-430 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the Proposed Transaction? | A1: Yes.

Relevant facts and circumstances: The X Trust was established by the provided deed of settlement dated DD MM 19XX (the Deed). There has been an amendment made to the Deed since the establishment of the Trust. The X Trust is an Australian resident for income tax purposes. The named Primary Beneficiaries and General Beneficiaries are all within the relevant group. The Trustee is a company that was established on DD MM 19XX. The business real property held by the X Trust is a commercial premises (the Premises). The Premises was purchased by the X Trust under contract dated DD MM 19XX. The Premises has been used in the business of another Family Trust since the Family Trust purchased the business under contract dated DD MM 20XX. The Family Trust was established by deed dated DD MM 20XX. All Primary and General Beneficiaries of the Family Trust fall within the same family group as stated before. The Family Trust is an Australian resident for income tax purposes. The Trustees and Primary Beneficiaries both work within the business on a day-to-day basis as required. These roles will not change following the transfer. The Family Trust is a Small Business Entity as defined in section 328-110 of the ITAA 1997 as it: (a) is carrying on a business in the current year, and (b) the entity carried on a business in the previous year, and its turnover was less than $10 million. The Premises: • has been owned for more than 15 years and has been actively used in the business for more than X years per section 152-35 of the ITAA 1997. • is an active asset as it is used in the course of carrying on the business by a connected entity in accordance with section 152-40 of the ITAA 1997. The Proposed Transaction It is intended that the Premises will be transferred to a New Trust which has the sole purpose of holding the Premises. It is intended that the Premises will remain in the New Trust for the foreseeable future and will not be used for private purposes. The New Trust to hold the property has not yet been established. A Family Trust Election will be made in the first tax return of the trust, ensuring ultimate economic ownership of the property will not be impacted by the transfer. The New Trust will be an Australian resident for income tax purposes. Both the New Trust and the X Trust will be connected with the Family Trust for the purposes of section 328-125 of the ITAA 1997. The director will remain the same and hold more than X% of the voting rights of all relevant entities and trustees. The aggregated turnovers of the Family Trust and the X Trust will be less than $10 million for the relevant income year. The Taxpayer has stated the purpose of the Proposed Transaction is: • to simplify and improve the efficiency of managing the Premises business, including streamlining administration and enabling more effective strategic oversight by having a dedicated property-holding trust, and • to provide additional asset protection by separating the Premises from other higher-risk assets such as fuel retailing premises held within the X Trust, and reducing exposure of personal and non-business assets to operational liabilities. All parties to the Proposed Restructure will choose to apply a roll-over under paragraph 328-430(1)(f) of the ITAA 1997. Assumptions The X Trust will not be terminated. No amendments will be made to the Deed. The Taxpayer asserts this is a genuine restructure and that, in line with the safe harbour rules in section 328-435 of the ITAA 1997, for the X-year period after the transaction takes effect: • there is no change in ultimate economic ownership as the beneficiaries of the New Trust will be the same group of people who are beneficiaries of the existing trust, and a Family Trust Election will be made in the first tax return of the trust, ensuring ultimate economic ownership of the property will not be impacted by the transfer; • the Premises will continue to be used in the business and thus continue to be an active asset; and • there is no significant or material private use of the Premises. Detailed reasoning Overview of the law 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. Section 328-430 states: 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 a. 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 b. 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 c. the transferor and each transferee meet the residency requirement in section 328-445 for an entity; and d. the transferor and each transferee choose to apply a roll-over under this Subdivision in relation to the assets transferred under the transaction. The X Trust is the transferor and will transfer the Premises to the New Trust as the transferee. 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. 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 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. The main reasons for the implementation of the Proposed Transaction are: • to simplify and improve the efficiency of managing the Premises business, including streamlining administration and enabling more effective strategic oversight by having a dedicated property-holding trust, and • to provide additional asset protection by separating the Premises from other higher-risk assets such as fuel retailing premises held within the X Trust, and reducing exposure of personal and non-business assets to operational liabilities. 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. In a bona fide commercial arrangement the new structure is one that is likely to have been adopted had the owners obtained appropriate professional advice when setting up the business. The Proposed Transaction appears to be 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. In line with the safe harbour in section 328-435, your facts do not indicate that within the X-year period following the Proposed Transaction: • there will be a change to the ultimate economic ownership of any of the significant assets of the business • that the Premises will cease to be an active asset, and • there will be material private use of the Premises. Therefore, it is accepted the Proposed Transaction is a genuine restructure for the purposes of paragraph 328-430(1)(a). 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: 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 oX 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. 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 (EM) states at paragraphs 1.29 and 1.3, in relation to section 328-430: ... The ultimate economic owners of an asset are the individuals who, directly or indirectly, beneficially own an asset. ... 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. In relation to explaining how 328-440 operations, paragraph 1.36 of the EM states: To meet this alternative test, every individual who had ultimate economic ownership of the transferred asset before the transfer, and every individual who has ultimate economic ownership of the transferred asset after the transfer, must be members of the family group relating to the family trust. In the Proposed Transaction, the transfer is between discretionary trusts. To ensure no material change in ultimate economic ownership for the purposes of paragraph 328-430(1)(c), the transaction is intended to rely on section 328-440 by making sure the asset is within a family trust and that the relevant individuals remain within the same family group immediately before and after the transfer. The X Trust is a non-fixed discretionary trust. The New Trust will make a Family Trust Election in its first return, nominating the same specified individual as in the X Trust. Accordingly, the Premises will be the property of a family trust before and after the transfer, satisfying both subsections of section 328-440(a). Before the Proposed Transaction, the Premises is owned by the X Trust. After the transaction, it will be owned by the New Trust. The ultimate economic owners remain members of the same family group. This satisfies sections 328-440(b) and (c). LCR 2016/3 confirms that maintaining ultimate economic ownership within the same family group, coupled with continued active business use of the asset, is a strong indicator that the restructure satisfies the genuine restructure condition. As the alternative ultimate economic ownership test under section 328-440 will be satisfied, the Proposed Transaction will not have the effect of changing the ultimate economic ownership of the Premises for the purposes of paragraph 328-430(1)(c). 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. Paragraph 152-40(1)(b) provides that an intangible CGT asset is an active asset if you own the asset and it is inherently connected with a business carried on (whether alone or in partnership) by you, your affiliate or another entity that is connected with you. Note 3 to paragraph 152-40(1)(b) states that an example of an asset that is inherently connected with a business is goodwill. The asset being transferred is the Premises which is business real property owned by the X Trust and used in the course of carrying on the Premises business by the Family Trust, an entity connected with the X Trust. As the Premises is a tangible CGT asset that has been used in a business carried on by a connected entity, it satisfies paragraph 152-40(1)(a) of the ITAA 1997 and therefore is an active asset. For Subdivision 328-G, the parties rely on paragraph 328-430(1)(b)(i) because the X Trust is a small business entity in the income year of transfer. Under subparagraph 328-430(1)(d)(i), where paragraph 328-430(1)(b)(i) applies, the asset must be an active asset at the time the transfer takes effect. For the reasons stated in paragraph 52, the Premises is an active asset at the time of transfer. Therefore, the requirement in subparagraph 328-430(1)(d)(i) will be satisfied. 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. All involved are Australian residents for income tax purposes, the requirement in paragraph 328-430(1)(e) will be satisfied. 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 asset transferred under the transaction. The X Trust and the New Trust will choose to apply the roll-over in relation to the transfer of the Premises. Therefore, the requirement in paragraph 328-430(1)(f) will be satisfied. Conclusion As each of the requirements in subsection 328-430(1) have been met, the X Trust is eligible to choose roll-over relief under Subdivision 328-G in relation to the transfer of the Premises to the New Trust.