Private ruling: CGT roll-over
Date of advice: 9 February 2026
Published: 30 March 2026
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Taxpayer be eligible to obtain a capital gains tax roll-over under Subdivision 122-A of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the proposed transfer of shares to Company C? | A1: Yes. | Q2: Will the pre-CGT shares that are transferred under the Proposed Restructure maintain their pre-CGT status when held by Company C under section 122-70 of the ITAA 1997? | A2: Yes. | Q3: Will the Company C shares issued to the Taxpayer in exchange for their pre-CGT Company A shares be pre-CGT assets for the Taxpayer under section 122-40 of the ITAA 1997? | A3: Yes. | Q4: Will the Proposed Restructure described in this ruling constitute a scheme to which Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) applies within the meaning of section 177D of the ITAA 1936? | A4: No. | Q5: Will section 177EA of the ITAA 1936 apply to the Proposed Restructure? | A5: No. | Q6: Will section 177E of the ITAA 1936 apply to the Proposed Restructure? | A6: No.

Relevant facts and circumstances: Group structure Company A is an Australian private company. It has class A and B shares on issue. Of the shares on issue, the Taxpayer and their sibling, (and their respective families) control 50% each through various interposed entities. The class A shares are held by the siblings group, and the class B shares are held by the Taxpayer and entities controlled by the Taxpayer. Both classes of shares entitle the shareholders to the right to vote, the right to dividends and to any surplus capital upon winding up. The Taxpayer owns a number of the class B shares directly in their personal capacity. Company B is an Australian private company. It has ordinary shares on issue. Company A owns a number of the ordinary shares in Company B and is the ultimate holding company of Company B. The Company B shares held by Company A were acquired prior to 20 September 1985. The Taxpayer and their sibling own the remaining ordinary shares in Company B. Company A and Company B were both registered and active businesses prior to 20 September 1985. Business operations and financials Company B is a manufacturing and distribution business. Company A holds significant passive investments including the shares in Company B as well as listed share portfolios and real estate. In the past, Company A has served as the quasi financer for Company B. When Company B performed strongly, surplus profits were paid out of Company B to Company A and retained in Company A. Initially, Company A retained its profits and invested those profits in liquid assets to hold sufficient funding to support and reinvest in Company B over the ups and downs of the business cycle. However, in recent years Company B has not required the same level of funding as the business has performed very strongly and provided significant dividend payments to Company A. Profits after tax for Company A have also been significant. Company A now has significant retained earnings. Company A has paid regular fully franked dividends to its shareholders and has done so for a number of years. Company A does not have any significant liabilities. The Taxpayer's family interests in Company A are held through three separate shareholdings. Succession planning The Taxpayer is advanced in years and currently in good health. Both the Taxpayer and their sibling are directors of Company A and Company B and equal shareholders, having joint control of both entities through the interests they hold. Other than the interest in Company A and Company B, the financial relationship between the Taxpayer and their sibling and their respective families are separate. The Taxpayer and their sibling both have three children each. The children do not have a strong relationship with one another. Over recent years, the siblings have sought to separate their investments from each other by drawing larger dividends from Company A whilst recognising that they hold significant wealth jointly through their interest in Company A and Company B. To the greatest extent possible, the Taxpayer wishes to manage the transfer of wealth from Company A to structures they and their immediate family have sole control over during their lifetime. The Taxpayer has concerns around the management of accumulated wealth in the Company A and Company B structure following their death and wishes to simplify this as much as possible during their lifetime. In particular, they are concerned that the management of wealth post their and their sibling's death will prove problematic given the inevitable complexities associated with a number of stakeholders (the children) being involved in decision making associated with the management of that wealth. The Taxpayer is reviewing their current ownership structure in Company A to facilitate their own succession planning to allow more of the accumulated wealth to be held in a vehicle that is wholly independent from their sibling and the sibling's children (whilst recognising that the active business will continue to be held jointly with their sibling's family). The proposed succession plan and proposed restructure is intended to facilitate the above aims whilst the Taxpayer is alive and gives the Taxpayer a level of control and influence over the transfer of wealth to their family whilst they are alive which is important to the Taxpayer. It also reduces the future complexity associated with the transfer of wealth post the Taxpayer's death. It is important to the Taxpayer that as many of these issues are managed during the Taxpayer's life and are not left for their executors to manage. The Taxpayer has a strong desire that their children continue to own Company A and Company B for the foreseeable future. In this respect the Taxpayer's Will is structured to ensure that all their children will jointly control the Taxpayer's ownership interest in Company A and Company B and will not be able to make a decision to sell those interests independently of one another. Proposed succession plan The proposed succession plan structure (Proposed Restructure) is as follows: • A new company (Company C) will be incorporated with the Taxpayer as the sole shareholder. • The Taxpayer and their spouse will be the directors of Company C. • The Taxpayer will transfer the Company A shares that they hold personally to Company C. • Company C will issue shares to the Taxpayer as consideration for the transfer of the Company A shares on a one-to-one basis and the Taxpayer will remain the sole shareholder of Company C. The shares in Company C will not be redeemable shares. • It is intended that a capital gains tax rollover under subdivision 122-A will be applied to the transfer, and as a consequence: ­ shares the Taxpayer receives in Company C attributable to their pre-CGT shares in Company A will be pre-CGT shares in Company C; and ­ shares the Taxpayer receives in Company C in respect of the Taxpayer's remaining post-CGT shares in Company A will be post-CGT shares in Company C and their cost base will reflect the Taxpayer's current tax cost base for those Company A shares. • Following the restructure dividends that are currently paid to the Taxpayer would instead be paid to Company C. Future wealth management Funds drawn from Company A to Company C would be reinvested into passive investments held by Company C. The funds will not be available for the Taxpayer's personal benefit and will not be drawn on by the Taxpayer or their family under any form of loan or similar arrangement. If the Taxpayer wishes to access the funds, the new company will declare a dividend payable to the Taxpayer for the amount the Taxpayer is seeking to access. The Taxpayer would be subject to personal tax in respect of that dividend. Other facts The Taxpayer is an Australian tax resident. The Taxpayer and Company C will all be Australian tax residents at the time the Taxpayer's shares are transferred to Company C.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 177A(1) | Income Tax Assessment Act 1936 paragraph 177C(1)(a) | Income Tax Assessment Act 1936 subsection 177D(2) | Income Tax Assessment Act 1936 section 177D | Income Tax Assessment Act 1936 subsection 177D(1) | Income Tax Assessment Act 1936 paragraph 177D(2)(a) | Income Tax Assessment Act 1936 paragraph 177D(2)(b) | Income Tax Assessment Act 1936 paragraph 177D(2)(c) | Income Tax Assessment Act 1936 paragraph 177D(2)(d) | Income Tax Assessment Act 1936 paragraph 177D(2)(e) | Income Tax Assessment Act 1936 paragraph 177D(2)(f) | Income Tax Assessment Act 1936 paragraph 177D(2)(g) | Income Tax Assessment Act 1936 paragraph 177D(2)(h) | Income Tax Assessment Act 1936 section 177EA | Income Tax Assessment Act 1936 paragraph 177EA(3)(a) | Income Tax Assessment Act 1936 paragraph 177EA(3)(b) | Income Tax Assessment Act 1936 paragraph 177EA(3)(c) | Income Tax Assessment Act 1936 paragraph 177EA(3)(d) | Income Tax Assessment Act 1936 paragraph 177EA(3)(e) | Income Tax Assessment Act 1936 subsection 177EA(17) | Income Tax Assessment Act 1936 paragraph 177EA(17)(a) | Income Tax Assessment Act 1936 paragraph 177EA(17)(b) | Income Tax Assessment Act 1936 paragraph 177EA(17)(c) | Income Tax Assessment Act 1936 paragraph 177EA(17)(d) | Income Tax Assessment Act 1936 paragraph 177EA(17)(e) | Income Tax Assessment Act 1936 paragraph 177EA(17)(f) | Income Tax Assessment Act 1936 paragraph 177EA(17)(f) | Income Tax Assessment Act 1936 paragraph 177EA(17)(ga) | Income Tax Assessment Act 1936 paragraph 177EA(17)(h) | Income Tax Assessment Act 1936 paragraph 177EA(17)(i) | Income Tax Assessment Act 1936 paragraph 177EA(17)(j) | Income Tax Assessment Act 1936 section 177E | Income Tax Assessment Act 1936 paragraph 177E(1)(a)(ii) | 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 section 122-25 | Income Tax Assessment Act 1997 section 122-35 | Income Tax Assessment Act 1997 subsection 122-40(3) | Income Tax Assessment Act 1997 section 122-70 | Income Tax Assessment Act 1997 subsection 122-70(3)

Reasons for decision: Detailed Reasoning - Question 1: Will the Taxpayer be eligible to obtain a capital gains tax roll-over under Subdivision 122-A of the ITAA 1997 in respect of the proposed transfer of shares to Company C? | Summary: The Taxpayer will be eligible to obtain a CGT roll-over. | Detailed Reasoning - Detailed reasoning: Section 122-15 of the ITAA 1997 states that individuals can choose to obtain a roll-over if CGT event A1 happens involving them and a company in the circumstances set out in sections 122-20 to 122-35. Paragraph 122-20(1)(a) states that the consideration received for the trigger event happening must only be shares in the company. The shares cannot be redeemable shares (subsection 122-20(2)), and the market value of the shares received must be substantially the same as the market value of the assets disposed of (paragraph 122-20(3)(a)). Section 122-25 requires that: • The individual must own all the shares in the company just after the time of the trigger event, in the same capacity as they owned the shares that the company now owns. • The ordinary and statutory income of the company must not be tax exempt. • Both the individual and the company are Australian tax residents at the time of the event. Section 122-35 addresses when the company undertakes to discharge a liability in respect of the CGT asset. CGT event A1 will happen when the Taxpayer disposes of the shares they personally hold in Company A to Company C. In consideration for the Company A shares, the Taxpayer will receive non-redeemable shares in Company C on a one-to-one basis. The market value of the Company C shares will be substantially the same as the market value of the Company A shares as they will both reflect the underlying assets in Company A. The Taxpayer will own all the shares in Company C immediately after the trigger event. Company C will not be exempt from income tax on its ordinary and statutory income. The Taxpayer, Company A and Company C will all be Australian tax residents at the time of the event. Section 122-35 is not applicable as Company A will not undertake to discharge any liabilities. The Taxpayer will be eligible to obtain a roll-over under Subdivision 122-A. | Detailed Reasoning - Question 2: Will the pre-CGT shares that are transferred under the Proposed Restructure maintain their pre-CGT status when held by Company C under section 122-70 of the ITAA 1997? | Summary: Yes. | Detailed Reasoning - Detailed reasoning: Section 122-70 outlines the consequences for the company where the individual chooses to obtain a roll-over under Subdivision 122-A. Subsection 122-70(3) states that if the individual acquired the asset before 20 September 1985, the company is taken to have acquired it before that day. The Taxpayer acquired a number of their Company A shares before 20 September 1985. Under the proposed restructure, the pre-CGT shares will retain their pre-CGT status when held by Company C. | Detailed Reasoning - Question 3: Will the Company C shares issued to the Taxpayer in exchange for their pre-CGT Company A shares be pre-CGT assets for the Taxpayer under section 122-40 of the ITAA 1997? | Summary: Yes. | Detailed Reasoning - Detailed reasoning: Subsection 122-40(3) states that if an individual acquired the disposed asset before 20 September 1985, they are taken to have acquired the shares in the company before that day. As stated above, the Taxpayer acquired a number of their Company A shares before 20 September 1985. The Company C shares issued to the Taxpayer in exchange for their pre-CGT Company A shares will be taken to be pre-CGT assets. | Detailed Reasoning - Question 4: Will the Proposed Restructure described in this ruling constitute a scheme to which Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) applies within the meaning of section 177D of the ITAA 1936? | Summary: No. | Detailed Reasoning - Detailed reasoning: Section 177D broadly provides that Part IVA applies to a scheme in connection with which the taxpayer has obtained a tax benefit if, after having regard to the factors listed in subsection 177D(2), it would be concluded that a person who entered into or carried out the scheme, or any part of it, did so for the purpose of enabling the taxpayer to obtain the tax benefit. Subsection 177A(5) clarifies that the 'purpose' includes the dominant purpose where there are two or more purposes. The dominant of two or more purposes is the prevailing or most influential purpose. The issue under Part IVA is whether the scheme was entered into for the relevant purpose having regard to the objective factors in subsection 177D(2). Subsection 177A(1) defines 'scheme' as: a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and b) any scheme, plan, proposal, action, course of action or course of conduct. 'Scheme' for the purposes of Part IVA has a broad definition. [1] 'Tax Benefit' is defined in section 177C; and the bases for identifying tax benefits are specified in section 177CB. In light of the facts and circumstances in this case, it is concluded that the Proposed Restructure is not a scheme to which Part IVA applies within the meaning of section 177D. In this regard: • The Proposed Restructure is a scheme for the purposes of Part IVA. The scheme for the purposes of this ruling does not include any dividends paid to the Taxpayer's children after their death. • It is accepted that the sole or dominant purpose of the Proposed Restructure is to facilitate the Taxpayer's succession planning during their lifetime. • In particular, it is accepted that the dominant purpose of the Proposed Restructure is effect the transfer of wealth from Company A to structures they and their immediate family have sole control over during their lifetime, which is intended to address their concerns regarding the difficulties arising from the management of wealth by the family stakeholders after their and their siblings death. | Detailed Reasoning - Question 5: Will section 177EA of the ITAA 1936 apply to the Proposed Restructure? | Summary: No. | Detailed Reasoning - Detailed reasoning: Section 177EA of the ITAA 1936 is an anti-avoidance provision that applies where a scheme involving the disposition of shares is entered into with a purpose of enabling a taxpayer to obtain an imputation benefit. It applies where, broadly: • there is a disposal of shares or interests in shares (paragraph 177EA(3)(a)); • a franked dividend is paid or payable (paragraphs 177EA(3)(b) and (c)); • the taxpayer would, or could reasonably be expected to, receive franking credit benefits from the dividend (paragraph 177EA(3)(d)); and • having regard to specified circumstances, it would be concluded that a purpose of at least one of the participants was to obtain a franking credit benefit. It is not necessary for the purpose to be the dominant purpose. It is not sufficient, however, for the purpose to be merely incidental (paragraph 177EA(3)(e)). In Mills v Commissioner of Taxation [2012] HCA 51, Gageler J affirmed the description of 'incidental purpose' in the Explanatory Memorandum for section 177EA: [a] purpose is an incidental purpose when it occurs fortuitously or in subordinate conjunction with another purpose, or merely follows another purpose as its natural incident. [2] Subsection 177EA(17) outlines a non-exhaustive list of relevant circumstances to determine whether a purpose of at least of one of the participants was to obtain a franking credit benefit. The purpose of the scheme is described above; and, further, there is no indication on the facts and circumstances of this case of a more-than-incidental purpose of obtaining a franking credit benefit. As such, section 177EA does not apply to the Proposed Restructure. | Detailed Reasoning - Question 6: Will section 177E of the ITAA 1936 apply to the Proposed Restructure? | Summary: No. | Detailed Reasoning - Detailed reasoning: Section 177E of the ITAA 1936 is an anti-avoidance provision designed to prevent tax benefits being obtained as part of a dividend stripping scheme by deeming Part IVA to apply to the scheme. Section 177E operates where four pre-conditions are satisfied: [3] • in relation to a company, there is a scheme in the nature of dividend stripping, or one that has the substantially the same effect, in which property is disposed of; [4] • the disposal of the property represents, in whole or in part, a distribution of profits of the company; [5] • if immediately before the scheme was entered into, the company had paid a dividend out of profits of an amount equal to the amount of profits represented by the disposal of property, an amount would, or might reasonably be expected to, by reason of that hypothetical dividend, have been included in a taxpayer's assessable income; [6] and • the scheme is entered into after 27 May 1981. [7] 'Scheme' is defined in subsection 177A(1). 'Dividend stripping' is not defined in the ITAA 1936. IT 2627 states that: in its traditional sense a dividend stripping scheme would include one where a vehicle entity (the stripper) purchases shares in a target company that has accumulated or current years' profits that are represented by cash or other readily-realisable assets. The stripper pays the vendor shareholders a capital sum that reflects those profits and then draws off the profits by having paid to it a dividend (or a liquidation distribution) from the target company [8] The case law states that a dividend strip typically has the following characteristics: [9] • a target company with substantial undistributed profits creating a potential tax liability, either for the company or its shareholders; • the sale or allotment of shares in the target company to another party; • the payment of a dividend to the purchaser or allottee of the shares out of the target company's profits; • the purchaser or allottee escaping Australian income tax on the dividend so declared; • the vendor shareholders receiving a capital sum for the shares in an amount the same as or very close to the dividends paid to the purchasers (there being no capital gains tax at the relevant times); and • the scheme being carefully planned, with all the parties acting in concert, for the predominant if not the sole purpose of the vendor shareholders, in particular, avoiding tax on a distribution of dividends by the target company. Section 177E only applies to schemes which have the dominant (although not necessarily exclusive) purpose of avoiding tax. [10] Assessing the purpose of the scheme is an objective test having regard to the characteristics of the scheme and the objective circumstances in which the scheme was designed and operated. [11] Regarding schemes that have substantially the effect of a scheme by way of or in the nature of dividend stripping, the High Court in Consolidated Press stated that paragraph 177E(1)(a)(ii) addresses schemes that may have substantially the same effect but 'some means other than a dividend or deemed dividend is employed to make the distribution.' [12] The scheme constituted by the Proposed Restructure does not fall within the scope of schemes that are in the nature of dividend stripping, or those that have substantially the same effect as dividend stripping. Further, the scheme does not have the dominant purpose of tax avoidance. It is accepted that the purpose of the scheme is to transfer the Taxpayer's wealth from Company A to structures their controls during their lifetime to avoid any family disputes over wealth after their death. In addition, the Taxpayer's financial position will not change as a result of the scheme. As such, section 177E of the ITAA 1936 will not apply to the Proposed Restructure. [1] Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 [2] Mills v Commissioner of Taxation [2012] HCA 51, paragraph [64] [3] IT 2627, paragraph [5] [4] Paragraph 177E(1)(a) [5] Paragraph 177E(1)(b) [6] Paragraph 177E(1)(c); IT 2627, paragraph [24] [7] Paragraph 177E(1)(e); IT 2627, paragraph [26] [8] IT 2627, paragraph [9] [9] TD 2014/1, paragraph [17]; Commissioner of Taxation v Consolidated Press Holdings Ltd [2001] HCA 32, paragraph [126]; Commissioner of Taxation v Consolidated Press Holdings Ltd [1999] FCA 1199, paragraph [136]; Lawrence v Commissioner of Taxation [2009] FCAFC 29 [10] Commissioner of Taxation v Consolidated Press Holdings Ltd [2001] HCA 32, paragraph [133] [11] Commissioner of Taxation v Consolidated Press Holdings Ltd [1999] FCA 1199, paragraph [174] [12] Commissioner of Taxation v Consolidated Press Holdings Ltd [2001] HCA 32, paragraph [140]