Private ruling: CGT - rollovers
Date of advice: 26 May 2026
Published: 3 August 2026
Ruling period: Income year ending 30 June 2026 | Income year ending 30 June 2027

Ruling: Q1: Will Person X be eligible to choose to obtain a roll-over under Subdivision 122-A of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the transfer of their shares in company B to company C? | A1: Yes | Q2: Will Person Y be eligible to choose to obtain a roll-over under Subdivision 122-A of the ITAA 1997 in relation to the transfer of their shares in company B to company D? | A2: Yes

Relevant facts and circumstances: (1) Company A is an Australian resident for tax purposes, incorporated with XX ordinary shares on issue. (2) Person X and Person Y have been directors of company A. They are Australian residents for tax purposes. (3) All issued shares in company A have been held by company B since company A's incorporation. (4) Company B is an Australian resident for tax purposes. (5) Person X and Person Y have been directors of company B. (6) There are XX ordinary shares issued in company B, held as follows: Shareholder No. of shares held [1] Percentage of shares held Trustee for the X Family Trust XX 16.67% Trustee for the Y Family Trust XX 16.67% Person X XX 33.33% Person Y XX 33.33% Total XX 100% (7) X Family Trust is a discretionary family trust established for the benefit of Person X and their family. Y Family Trust is a discretionary family trust established for the benefit of Person Y and their family. (8) Person X and Person Y are the founders of the businesses carried on by company A and company B. (9) In the year ended DD MM 20YY, company C was incorporated in Australia with XX ordinary shares on issue. Person X is the sole director and shareholder in company C. (10) Company D was also incorporated in Australia with XX ordinary shares on issue in the year ended DDMM YYYY. Person Y is the sole director and shareholder in company D. (11) Company C and company D are not exempt entities and have no exempt income. (12) Person X will transfer their 33.33% shareholding in company B to company C and Person Y will transfer their 33.33% shareholding in company B to company D. Neither Person X nor Person Y has any intention of disposing of their company B shares except as part of this restructure. (13) Person X and Person Y will not receive any consideration from company C and company D respectively for the transfer of their shares in company B. (14) Company C and company D have been incorporated for the sole purpose of acquiring the company B shares from Person X and Person Y. These companies will therefore not hold any other assets or have any liabilities at the time of the transfer. (15) Person X and Person Y's shares in company B are not precluded assets pursuant to subsection 122-25(3) of the ITAA 1997, an asset that becomes trading stock of company C or company D just after the transfer, or any of the other specified assets listed in subsection 122-25(2) of the ITAA 1997. (16) As it stands, there are no other plans or arrangements relating to the disposal of shares in any of company A, company B, company C or company D

Relevant legislative provisions: Income Tax Assessment Act 1997 section 84-5 | Income Tax Assessment Act 1997 section 11-5 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 104-10(2) | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 Subdivision 122-A | Income Tax Assessment Act 1997 section 122-15 | Income Tax Assessment Act 1997 section 122-20 | Income Tax Assessment Act 1997 subsection 122-20(1) | Income Tax Assessment Act 1997 paragraph 122-20(1)(a) | Income Tax Assessment Act 1997 paragraph 122-20(1)(b) | Income Tax Assessment Act 1997 subsection 122-20(2) | Income Tax Assessment Act 1997 subsection 122-20(3) | Income Tax Assessment Act 1997 section 122-25 | Income Tax Assessment Act 1997 subsection 122-25(1) | Income Tax Assessment Act 1997 subsection 122-25(2) | Income Tax Assessment Act 1997 subsection 122-25(3) | Income Tax Assessment Act 1997 subsection 122-25(5) | Income Tax Assessment Act 1997 subsection 122-25(6) | Income Tax Assessment Act 1997 paragraph 122-25(6)(a) | Income Tax Assessment Act 1997 section 122-35 | Income Tax Assessment Act 1997 subsection 122-40(1) | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: Person X and Person Y will be eligible to choose to obtain a roll-over under Subdivision 122-A in relation to the transfer of their shares in company B to company C and company D respectively. | Detailed Reasoning - Detailed reasoning: Broadly, Subdivision 122-A sets out when an individual or trustee of a trust can obtain CGT roll-over relief if they transfer a CGT asset, or all the assets of a business, to a company. | Detailed Reasoning - Section 122-15: Disposal of shares giving rise to CGT event A1: Section 122-15 provides that an individual can choose to obtain a roll-over if a specified CGT event (a trigger event, including CGT event A1) occurs involving the individual and a company in the circumstances set out in sections 122-20 to 122-35. CGT event A1 happens under section 104-10 if you dispose of a CGT asset. Under subsection 104-10(2), you dispose of a CGT asset if a change of ownership occurs from you to another entity. Under the proposed transaction, Person X and Person Y will transfer their shares in company B to company C and company D respectively. The shares in company B are CGT assets as defined in section 108-5. Therefore, the disposal of the shares in company B to company C and company B will give rise to CGT event A1 for Person X and Person Y, thereby satisfying the requirement under section 122-15. | Detailed Reasoning - Section 122-20 - What you receive for the trigger event: Subsection 122-20(1) states that the consideration you receive for the trigger event happening must be only: • shares in the company - paragraph 122-20(1)(a); or • for a disposal of a CGT asset, or all the assets of a business, to the company (a disposal case) - shares in the company and the company undertaking to discharge one or more liabilities in respect of the asset or assets of the business (as appropriate) - paragraph 122-20(1)(b). The shares received by the individual cannot be redeemable (subsection 122-20(2), and the market value of the shares received from the trigger event happening must be substantially the same as the market value of the CGT asset or assets disposed of, less any liabilities the company undertakes to discharge in respect of the asset or assets (as appropriate) (subsection 122-20(3)). Under the proposed transaction, Person X and Person Y will not receive any consideration from company C and company D for the disposal of their company B shares. However, as confirmed in ATO ID 2004/94 [2] , section 122-20 does not specifically require that a taxpayer must receive consideration for the disposal of an asset to a company in order to obtain the roll-over under Subdivision 122-A. Rather, it provides that if there is consideration received for the disposal, then that consideration must be either non-redeemable shares in the company or non-redeemable shares in the company and the company's undertaking to discharge one or more liabilities in respect of the asset or assets. As Person X and Person Y will not receive any consideration in respect of the disposal, there is no need to consider the application of section 122-20. | Detailed Reasoning - Section 122-25 - Other requirements: Subsection 122-25(1) requires the individual to own all the shares in the company just after the time of the trigger event. Subsection 122-25(1) will be satisfied under the proposed transaction since: • Person X will be the sole shareholder in company C just after the disposal of their shares in company B; and • Person Y will be the sole shareholder in company D just after the disposal of their shares in company B. Subsection 122-25(2) provides that Subdivision 122-A does not apply to the disposal of any of the assets specified in the table in that subsection. Table item 1 of subsection 122-25(2) applies where you dispose of a CGT asset to the company. Table item 2 applies where you dispose of all the assets of a business to the company. Table item 1 applies here since Person X and Person Y are disposing of a CGT asset rather than all the assets of a business. Under table item 1, Subdivision 122-A does not apply to the following assets: • a collectable or personal use asset; • a decoration awarded for valour or brave conduct; • a precluded asset (as defined); • an asset that becomes trading stock of the company just after the disposal; or • an asset that becomes a registered emissions unit held by the company just after the disposal. A 'precluded asset' is defined in subsection 122-25(3) as a depreciating asset, trading stock or certain copyright interests in a film or a registered emissions unit. The shares in company C are not any of the assets listed in table item 1 of subsection 122-25(2) so roll-over relief under Subdivision 122-A in respect of the disposal of the shares is not denied by this provision. Subsection 122-25(5) requires that the ordinary income and statutory income of the company must not be exempt from income tax because it is an exempt entity for the income year of the trigger event. An 'exempt entity' is defined in section 995-1 as an entity all of whose ordinary income and statutory income is exempt from income tax because of this Act or because of another Commonwealth law, no matter what kind of ordinary or statutory income the entity might have. Section 11-5 contains a list of such entities, which broadly includes charities, societies and educational or scientific institutions. The ordinary and statutory income of company C and company D is not exempt from income tax and they will not be an exempt entity for the income year in which the trigger event occurs. Therefore, subsection 122-25(5) is satisfied. Subsection 122-25(6) is applicable if the taxpayer is an individual and requires (at paragraph 122-25(6)(a)) that at the time of the trigger event the individual and the company are both Australian residents. Person X, Person Y, company C and company D will all be Australian residents at the time of the disposal, thereby satisfying subsection 122-25(6). | Detailed Reasoning - Section 122-35 - Company undertakes to discharge a liability in a disposal case: Section 122-35 is only relevant if the company undertakes to discharge one or more liabilities in respect of the asset which is disposed of to the company. Since company C and company D will not undertake to discharge any liabilities in respect of the acquisition of the shares in company B, section 122-35 is not applicable. | Detailed Reasoning - Conclusion: Since the relevant requirements in Subdivision 122-A are satisfied, Person X and Person Y may choose to obtain a roll-over on the disposal of the shares in company B to company C and company D respectively, and disregard any capital gain or capital loss realised on the disposal in accordance with subsection 122-40(1). [1] These shares are all held on capital account. [2] Income Tax Capital gains tax: Subdivision 122-A rollover: no consideration received .