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Edited version of private advice

Authorisation Number: 1051705695948

Date of advice: 25 June 2020

Ruling

Subject: Small business restructure rollover

Question

Will the transfer of the Property from Company A to its shareholders be eligible for the small business restructure rollover under subdivision 328-G of the Income Tax Assessment Act (ITAA 1997)?

Answer

Yes.

The Commissioner is satisfied that the proposed transfer of the Property qualifies for relief under subdivision 328-G of the ITAA 1997. All parties to the transaction satisfy subparagraph 328-430(1)(b), ultimate economic ownership of the property will not change, all entities involved are Australian residents for tax purposes, and the property being transferred is an active asset. The restructure is authentic and maintains the continuity of use of the Property. Accordingly, this is a genuine restructure of an ongoing business (Law Companion Ruling LCR 2016/3 provides further information).

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Company A has the following shareholders:

·         X% held by Individual A as trustee for the Trust A;

·         X% held by Individual B as trustee for the Trust B;

·         X% held by Individual A; and

·         X% held by Individual B.

Company B is a small business entity with an aggregated turnover less than $XXX.

Trust A is a discretionary trust that distributed its income to Individual A in the year ended 30 June 20XX.

Trust B is a discretionary trust that distributed its income to Individual B and Individual C in the year ended 30 June 20XX. Individual C is Individual B's spouse.

Company A, Individual A, Individual B, Trust A and Trust B are residents for Australian tax purposes.

Company A owns vacant farming land (the Property).

Company A carries on a property development business but does not utilise the Property in its own activities.

The Property is wholly used in the primary production business of Individual C as trustee for Trust C.

For the years ended 30 June 20XX to 30 June 20XX, Trust C has distributed its income to Company C. Individual C is the sole director of Company C.

The proposed restructure

Company A will transfer the Property as tenants in common to its current shareholders in shares equal to their current respective shareholdings in Company A. The purpose of this transfer is to separate the Property from any potential risks associated with the property development activities of Company A and simplify the operations of Company A.

As the Property was not part of the land used in Company A's property development business, the property preferably should not have been purchased by Company A.

Trust C will continue to use the Property in their business.

Relevant legislative provisions

Subdivision 328-G of the Income Tax Assessment Act 1997

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