Private ruling: Small business restructure
Date of advice: 31 October 2025
Published: 13 April 2026
Ruling period: 1 July 20XX to 30 June 20XX

Ruling: Q1: Does the proposed transfer of Property A, Property B, Property C, and water entitlements 1, 2, 3, 4, 5 and 6 ( water entitlements ) from the Taxpayers to three nominated landholding trusts, qualify for roll-over relief under Subdivision 328-G of the Income Tax Assessment Act 1997 ( ITAA 1997 )? | A1: Yes. | Q2: Does the proposed transfer of Property D and Property E from the Taxpayers to a nominated landholding trust qualify for roll-over relief under Subdivision 328-G of the ITAA 1997? | A2: Yes. | Q3: If Property D and Property E qualified for roll-over relief under Subdivision 328-G of the ITAA 1997, would that relief still apply if those properties were sold within 3 years of transfer, as it is considered a genuine restructure of an ongoing business and is not reliant on the safe harbour rule under section 328-435? | A3: Yes.

Relevant facts and circumstances: 1. The Taxpayers own and operate a number of xxx properties and water licences in State A. 2. The Taxpayers own the below properties and water licences in the following entities; details provided. 3. The properties have been operated by X ( the Partnership ) since its establishment on XX/XX/20XX or their acquisition (whichever occurred later). The Taxpayers each hold a 50 per cent interest in the Partnership. 4. The Taxpayers live at Property B. The homestead is located on XXX, which has a total area of XXX hectares, with only the homestead used for private purposes. 5. The Taxpayers acquired their interest in Property B and Property A, as part of an intergenerational transfer from A's parents. Additional land was purchased later in the Taxpayers' individual names as it offered a simple trading and ownership structure, and easier access to finance as they could directly leverage their equity in their existing landholdings. 6. The most recent land purchases have been acquired by trusts to separate land ownership from the trading activities. As the properties have different geographic locations, each trust holds land relating to a specific geographic location allowing natural aggregations of land and associated finance to be dealt with separately to the remaining landholdings, if required. 7. The Partnership's trading activity and value of the land held by the Taxpayers has grown significantly in recent years. As a result, the Taxpayers would like to transfer their interest in the xx properties and water entitlements to nominated landholding trusts to consolidate the ownership of the land into geographic locations. This will provide the Taxpayers with a greater level of asset protection and support their objective to align land ownership with geographic location. 8. Multiple landholding trusts are considered preferrable from an asset protection perspective as the xxx land and water entitlements are exposed to different types of risk at different times, often connected to geographic area. By separating ownership of the land and water by geographic location, assets that are exposed to risk in one location are isolated from the land and water assets held in other locations. This provides for separation of assets and allows for independent management of the properties. 9. Had the Taxpayers purchased the land and water assets now, they would have acquired the properties in separate trusts, according to their location/natural aggregation. 10. The Taxpayers do not intend to restructure the ownership of Property F or Property G as they intend to sell those properties. 11. The Taxpayers do not now intend to sell Property A, Property B, Property C or the water entitlements to anyone outside their family group. 12. The Taxpayers have received offers to sell Property D and Property E in the past. Whilst they are not actively seeking to sell these properties to anyone outside their family group, they would consider selling the properties if they received a favourable offer that commercially benefited their business. 13. The Taxpayers intend to continue using the transferred assets in their xx business. 14. The Taxpayers are considering restructuring their trading entity from a partnership to a company to provide asset protection and a structure that allows for continued growth. If they proceed with the restructure, the partners will transfer the business to a new company, which will continue its current operations, utilising the same assets and employing the same key personnel. The Taxpayers would control that new company. 15. The Taxpayers are married and are both Australian tax residents. Nominated landholding trusts 16. Each of the nominated landholding trusts will have a corporate trustee, with the Taxpayers as the sole shareholders and directors of the company. 17. The corporate trustee will be incorporated in Australia. 18. The Taxpayers will be joint appointers of each of the trusts. 19. Each of the trusts will, prior to the proposed transfer occurring, have in place a family trust election nominating A as the individual specified in the family trust election. Each trust will therefore have the same family group. Each trust will also be a non-fixed trust. The Partnership 20. The Partnership was established on XX/XX/20XX. 21. The Taxpayers each hold a 50 per cent interest in the Partnership. 22. The Partnership conducts various activities on the properties, and utilises the water entitlements in its operations. 23. The annual turnover of the Partnership was $XXX,XXX in the income year ending 30 June 20XX. 24. The Partnership does not have a written partnership agreement. 25. The properties and water entitlements held by the Taxpayers have consistently been reported on the balance sheet of the Partnership since their acquisition. The proposed transactions 26. The Taxpayers will enter into a contract to: (a) sell their interest in Property A to a nominated landholding trust controlled by the Taxpayers (through control of the intended corporate trustee), under which the Taxpayers and their family will benefit. (b) sell their interest in Property C, water entitlements 1, 2, 3, 4, and 6 to a second nominated landholding trust controlled by the Taxpayers (through control of the intended corporate trustee), under which the Taxpayers and their family will benefit. (c) sell their interest in Property B and water entitlement 5 to a third nominated landholding trust controlled by the Taxpayers (through control of the intended corporate trustee), under which the Taxpayers and their family will benefit. (d) sell their interest in Property D and Property E to a fourth nominated landholding trust controlled by the Taxpayers (through control of the intended corporate trustee), under which the Taxpayers and their family will benefit. 27. It is intended to exchange the contracts prior to the income year ending 30 June 20XX, triggering CGT event A1 in the income year ending 30 June 20XX.

Relevant legislative provisions: Income Tax Assessment Act 1997, section 328G | Income Tax Assessment Act 1997, section 328-110(1) | Income Tax Assessment Act 1997, section 328-125(1) | Income Tax Assessment Act 1997, section 328-125(2)(a)(ii) | Income Tax Assessment Act 1997, section 328-125(3) | Income Tax Assessment Act 1997, section 328-125(4) | Income Tax Assessment Act 1997, section 328-430(1) | Income Tax Assessment Act 1997, section 328-430(1)(a) | Income Tax Assessment Act 1997, section 328-430(1)(b) | Income Tax Assessment Act 1997, section 328-430(1)(b)(ii) | Income Tax Assessment Act 1997, section 328-430(1)(b)(iii) | Income Tax Assessment Act 1997, section 328-430(1)(b)(iv) | Income Tax Assessment Act 1997, section 328-430(1)(c) | Income Tax Assessment Act 1997, section 328-430(1)(d) | Income Tax Assessment Act 1997, section 328-430(1)(d)(iii) | Income Tax Assessment Act 1997, section 328-430(1)(e) | Income Tax Assessment Act 1997, section 328-430(1)(f) | Income Tax Assessment Act 1997, section 328-430(2) | Income Tax Assessment Act 1997, section 328-435 | Income Tax Assessment Act 1997, section 328-440 | Income Tax Assessment Act 1997, section 328-445 Law Companion Ruling LCR 2016/3 Small Business Restructure Roll-over: genuine restructure of an ongoing business and related matters

Reasons for decision: Summary: 1. Subdivision 328-G provides owners of small business entities with the flexibility to restructure their businesses and the way their business assets are held while disregarding tax gains and losses that would otherwise arise. [1] 2. Section 328-430 outlines when a roll-over is available. There are six conditions that must be satisfied. Subsection 328-430(1) provides that the roll-over 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 part of, a genuine restructure of an ongoing business; (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 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; (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. [2] 3. In addition, subsection 328-430(2) provides that a 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. | Detailed Reasoning - First condition - genuine restructure of an ongoing business: 4. 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 going business' is a question of fact determined having regard to all of the circumstances surrounding the restructure. [3] 5. The Law Companion Ruling 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'. The first example given in LCR 2016/3 (outlined in paragraphs 17 - 23) refers to asset protection as motivating a 'genuine restructure of an ongoing business'. | Detailed Reasoning - Example 1: Asset protection: Facts 17. person 1 has been operating a small bookkeeping business and has branched out into financial planning after receiving their financial planning licence. Person1's business has grown significantly and their financial advice arm now generates much larger profits. 18. After being sued by a client for negligent financial advice, person1 has decided they are not prepared to conduct their business on their own account. 19. Person 1 transfers their active assets used to carry on their financial planning business into a discretionary family trust. They and their spouse are the beneficiaries and person1 is the primary individual specified in the family trust election in force I respect of the trust. For asset protection purposes, a corporate trustee is appointed and the trust contracts with clients. Person1 does not personally provide guarantees or indemnities. Person1 has also caused the trustee to employ other staff to service the larger client base. The trustee pays person1 and the other employees a salary commensurate to the service they provide to the business. 20. Person 1 and the trustee of the discretionary family trust choose to apply the SBRR. Relevant considerations 21. Person 1 is transferring assets from the original entity (themself) to quarantine their business from their personal assets. This is a benefit to person1 in terms of their ability to grow the riskier operations and enhance its profits. 22. The evidence available supports person1's claim of asset protection. Person1's asset protection strategy and commitment to expand their business is comprehensive and effective. Conclusion 23. Person 1 has achieved benefits to the ongoing efficient conduct of their small business. The restructure is a response to their business needs, facilitates further growth and is not unduly tax-driven. The economic ownership of the business is maintained. Accordingly the 'genuine restructure of an ongoing business' condition is satisfied. 6. Further, LCR 2016/3 states that 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 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. [4] 7. Paragraph 7 of the LCR 2016/3 outlines the following features that indicate a transaction is, or is part of, a 'genuine restructure of an ongoing business': (a) 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; (b) 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; (c) the economic ownership of the business and its restructured assets is maintained; (d) the small business owners continue to operate the business through a different legal structure; and (e) it results in a structure likely to have been adopted had the small business owners obtained appropriate professional advice when setting up the business. 8. 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 ownership interests. A restructure is likely to not be a genuine restructure of an ongoing business if: [5] (a) 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; (b) it effects an extraction of wealth from the assets of the business for personal investment or consumption; (c) it creates artificial losses or brings forward their recognition; (d) it effects a permanent non-recognition of gain or creates artificial timing advantages; and/ or (e) there are other tax outcomes that do not reflect economic reality. 9. Here, the Taxpayers intend to transfer certain real property and water rights to nominated landholding trusts to provide asset protection and to create a structure that allows for continued growth (to support their objective to align land ownership with geographic location, and for associated finance to be dealt with separately). The business (i.e. various activities on the properties and the utilisation of water entitlements in its operations) will continue to be carried on after the proposed restructure, either by the Taxpayers in the Partnership, or by a new company controlled by the Taxpayers. The Taxpayers will maintain their control and ownership of the assets after the restructure, as the nominated landholding trusts will be family trusts controlled by the Taxpayers and the Taxpayers will both be part of the relevant family group. The Taxpayers will be the sole shareholders and directors of each corporate trustee and will be joint appointers for the nominated landholding trusts. As a result, if it becomes necessary to apply the maximum net asset value test in relation to any of the nominated landholding trusts, the net value of CGT assets owned by the other landholding trusts would factor into that calculation, as they would all be controlled by the Taxpayers, and so would be connected entities under section 328-125. 10. The Taxpayers assert that multiple landholding trusts provides a better structure as the various properties and water rights are exposed to different types of risk, often associated with their different geographic locations. The Taxpayers assert the separation of the land and water ownership by geographic location will aid in quarantining these risks. 11. The Taxpayers have further stated that if the land and water assets were purchased now, they would have been acquired in separate trusts according to their location and natural aggregation. As such, the restructure will allow for a structure that will deliver benefits for the business and provide better asset protection. Aside from the proposed restructure, there is no intention to sell the business itself or extract wealth from the business. The assets will continue to be retained under the ultimate economic ownership of the Taxpayers. 12. All these factors in combination indicate that the proposed restructure is a genuine restructure of an ongoing business. Consequently, the requirement in paragraph 328-430(1)(a) is satisfied. | Detailed Reasoning - Second condition - small business entity or related entity: 13. Paragraph 328-430(1)(b) requires that each party to the transfer is one or more of the following entities in the income year in which the proposed transaction occurs: (a) a small business entity; (b) an affiliate of a small business entity; (c) connected with a small business entity; (d) a partner in a partnership that is a small business entity. 14. Subsection 328-110(1) provides that you are a small business entity for an income 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. 15. 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. 16. The Partnership, that is operated by the Taxpayers as partners, is a small business entity as defined in section 328-110. The aggregated turnover of the Partnership for the income year ending 30 June 20XX was $XXX,XXX. The Partnership will therefore be a small business entity for the income year ending 30 June 20XX, as the aggregated turnover was less than $10 million in the previous income year. The Taxpayers control the Partnership and each of the Taxpayers are, under section 328-125, connected with the Partnership. 17. The nominated landholding trusts will also be connected to the Taxpayers and to the Partnership. Under section 328-125 an entity is connected with another entity if both entities are controlled by the same third entity. The Taxpayers control the Partnership and the Taxpayers will control every corporate trustee of the nominated landholding trusts, to which they will be the sole shareholders and directors; and additionally, will be joint appointers of the nominated landholding trusts. As the nominated landholding trusts will be controlled by the Taxpayers, each trust will therefore be connected to the Partnership and will satisfy this requirement as each of the trusts will be connected to a small business entity (i.e. the trusts are connected to the Partnership). | Detailed Reasoning - Third condition - ultimate economic ownership: 18. Section 328-440 provides, for the purposes of paragraph 328-430(1)(c), that 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 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. 19. Here, the Taxpayers intend for the nominated landholding trusts to each make a family trust election nominating A as the primary individual for each trust. As such, each trust will have the same family group. The ultimate economic ownership in the assets will therefore remain the same, satisfying paragraph 328-430(1)(c). | Detailed Reasoning - Fourth condition - active assets: 20. Paragraph 328-430(1)(d) requires that at the time the transfer takes effect, the asset is an active asset (other than a depreciating asset). 21. Subsection 152-40(1) provides that a CGT asset is an active asset at a time if, at that time you own the asset (whether the asset is tangible or intangible) and it is used, or held ready for use, in the course of carrying on a business that is carried on by you, your affiliate or another entity that is connected with you. In addition, intangible assets are active assets when you, your affiliate, or another entity connected with you own it and it is inherently connected with the business. 22. Here, the land and water assets are used in the business of the Partnership (which is a small business entity). They are active assets. | Detailed Reasoning - Fifth condition - residency requirement: 23. Paragraph 328-430(1)(e) requires the transferor and all transferees to meet the residency requirement in section 328-445 for an entity. 24. Both the transferor and transferee will meet the residency requirements. Here, the Taxpayers are Australian residents, and the nominated landholding trusts will be resident trusts for CGT purposes, as the trustee companies will be incorporated in Australia. | Detailed Reasoning - Sixth condition - roll-over choice: 25. Paragraph 328-430(1)(f) requires the transferor and all transferees involved to choose to apply a roll-over in relation to the assets being transferred. 26. All the parties will have elected to apply the small business restructure roll-over relief under Subdivision 328-G. The Taxpayers and the nominated landholding trusts will all choose to apply the roll-over, which will therefore satisfy this requirement. | Detailed Reasoning - Consequence of the roll-over: 27. Section 328-450 provides that if the transfer of an asset occurs under a transaction to which section 328-430 applies, the transfer of the asset has no direct consequences under the income tax law. 28. There is no requirement in section 328-430 that the ultimate economic ownership of the asset must be held for a certain period of time. It is noted that the safe harbour rule in section 328-435 does specify a three-year time period in which the ultimate economic ownership of the asset must not change. However, the safe harbour rule is an alternative test to that contained in paragraph 328-430(1)(a) and does not limit that paragraph. | Detailed Reasoning - Conclusion: 29. Based on the above information, the restructure is a genuine restructure and the Taxpayers will be eligible to apply the small business restructure roll-over provisions upon the transfer of the xx properties and water entitlements to the nominated landholding trusts. The Taxpayers do not need to rely on the three-year safe harbour rule. [1] Income Tax Assessment Act 1997 , section 328-425. [2] Income Tax Assessment Act 1997 , subsection 328-430(1). [3] Law Companion Ruling LCR 2016/3 Small Business Restructure Roll-over: genuine restructure of an ongoing business and related matters, paragraph 5. [4] Law Companion Ruling LCR 2016/3 Small Business Restructure Roll-over: genuine restructure of an ongoing business and related matters, paragraph 6. [5] Law Companion Ruling LCR 2016/3 Small Business Restructure Roll-over: genuine restructure of an ongoing business and related matters, paragraph 10.

Does Part IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 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/gaar .