Private ruling: Capital gains tax
Date of advice: 19 May 2026
Published: 3 August 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Will the proposed transfer of the Property from you to a new discretionary trust (New Trust) qualify for relief under Subdivision 328-G of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You own the Property. You carry on a primary production business on the Property as a sole trader. Your aggregated turnover will be less than $X in the years ended 30 June 20YY and 30 June 20YY. You are proposing to transfer the Property to the New Trust. You will be the appointor of the New Trust. The New Trust will have a corporate trustee. You will be the sole director and shareholder of the corporate trustee. You will be the sole beneficiary of the New Trust. You are an Australian resident for tax purposes, and the New Trust will be a resident trust. The corporate trustee will make a family trust election (FTE) nominating you as the specified individual for the purposes of Schedule 2F of the Income Tax Assessment Act 1936 (ITAA 1936). Both you and the New Trust will choose to apply the roll-over in Subdivision 328-G of the ITAA 1997 in relation to the Property transferred under the transaction. Following the transfer of the Property the New Trust will carry on the primary production business. The aggregated turnover of the New Trust will be less than $X in the year ended 30 June 20YY. You also work as a contract sprayer. You are undertaking the transaction for asset protection purposes and to enable you to raise additional capital. Neither you or the New Trust are an exempt entity or a complying superannuation entity.

Relevant legislative provisions: Income Tax Assessment Act 1936 Schedule 2F | Income Tax Assessment Act 1997 section 328-110 | Income Tax Assessment Act 1997 Subdivision 328-G | Income Tax Assessment Act 1997 section 328-430 | Income Tax Assessment Act 1997 subsection 328-430(1) | Income Tax Assessment Act 1997 subsection 328-430(2) | Income Tax Assessment Act 1997 section 328-440

Reasons for decision: Summary: Subdivision 328-G of the ITAA 1997 provides an optional roll-over for gains and losses arising from the transfer of capital gains tax (CGT) assets, trading stock, revenue assets and depreciating assets as part of a genuine restructure of a small business. Section 328-430 of the ITAA 1997 sets out the requirements for the roll-over to be available. Subsection 328-430(1) of the ITAA 1997 provides that a 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 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) of the ITAA 1997 is satisfied in that income year, or would be satisfied in that income year if paragraph 152-10(1AA)(b) of the ITAA 1997 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, and (e) the transferor and each transferee meet the residency requirement in section 328-445 of the ITAA 1997 for an entity, and (f) the transferor and each transferee choose to apply a roll-over under Subdivision 328-G of the ITAA 1997 in relation to the assets transferred under the transaction. However, a roll-over under this Subdivision is not available if the transferor, or any transferee, is either an exempt entity or a complying superannuation entity (subsection 328-430(2) of the ITAA 1997). | Detailed Reasoning - Ultimate economic ownership - discretionary trusts (alternative test): In most cases the nature of a discretionary trust (particularly where there are multiple beneficiaries) will mean that it is not possible to determine the ultimate economic owner of its assets before or after they have been transferred and thereby to show that the ultimate economic ownership has not been materially changed. As such, a transfer of assets from or to a discretionary trust will generally not meet the requirements for ultimate economic ownership in paragraph 328-430(1)(c) of the ITAA 1997. Where it is not possible to demonstrate that ultimate economic ownership of the assets has been maintained, an alternative ultimate economic ownership test is available to discretionary trusts. Section 328-440 of the ITAA 1997 contains an alternative ultimate economic ownership test for discretionary trusts. Section 328-440 of the ITAA 1997 states that for the purposes of paragraph 328-430(1)(c) of the ITAA 1997, 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 of the ITAA 1997 provides: 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 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. 'Family group' is defined in section 272-90 of the ITAA 1936 with reference to the individual specified in a FTE. Section 328-440 of the ITAA 1997 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 took effect. 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 (as defined in by Schedule 2F to the ITAA 1936) relating to the family trust. Law Companion Ruling LCR 2016/3 Small Business Restructure Roll-over: genuine restructure of an ongoing business and related matters at paragraphs 108 and 109 describes that the alternative ultimate economic ownership test provides additional flexibility to small family businesses carried on through non-fixed trusts by allowing them to meet the requirement to maintain proportionate ultimate economic ownership of the transferred assets if the ultimate economic ownership of those assets remains within the family. The alternative test is only available when assets are included in the property of a non-fixed trust that is a family trust, that is, a non-fixed trust for which there is a FTE in force. | Detailed Reasoning - Small business entity: 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 $ 10million, (ii) your aggregated turnover for the current year is likely to be less than $ 10 million (subsection 328-110(1) of the ITAA 1997). However, you are not a small business entity for an income year (the current year) because of subparagraph 328-130(1)(b)(ii) of the ITAA 1997 if: (a) you carried on a business in each of the 2 income years before the current year, and (b) your aggregated turnover for each of those income years was $ 10million or more (subsection 328-110(3) of the ITAA 1997). | Detailed Reasoning - Application to your circumstances: You satisfy the requirements for the small business restructure roll-over because: • the transfer of the Property from you to the New Trust provides asset protection benefits, separating the land from your personal assets, and is considered, or is considered a part of, a genuine restructure of an ongoing business • you and the New Trust will be small business entities in the year ended 30 June 20YY as the aggregated turnover of each entity will be less than $10million • the transfer will not have the effect of materially changing the ultimate economic ownership of the Property as just after the transfer the Property will be included in the property of a non-fixed trust that is a family trust with you listed as the specified individual, and all the individuals who had ultimate economic ownership both before and after the transfer will be members of your family group • the Property is an active asset and will continue to be after the transfer • you are an Australian resident for tax purposes, and the New Trust will be a resident trust • both you and the New Trust will choose to apply the roll-over in relation to the transfer, and • neither party to the transfer is an exempt entity or a complying superannuation entity. As such, you qualify for relief under Subdivision 328-G of the ITAA 1997 in relation to the transfer of the Property to the New Trust and can disregard the gain arising from the transfer.

Does 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 . | You satisfy all the requirements for the small business restructure roll-over. As such, you qualify for relief under the roll-over and can disregard the gain arising from the transfer of the Property to the New Trust.