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Edited version of private advice
Authorisation Number: 1051585406905
Date of advice: 24 September 2019
Ruling
Subject: Small business restructure rollover
Question
Does the proposed transfer of land from you to a new discretionary trusts qualify for relief under subdivision 328-G of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
The Commissioner is satisfied that the proposed transfer of the active assets to the new discretionary trust(s) qualifies for relief under subdivision 328-G of the ITAA 1997 as it is considered that it is a genuine restructure of an ongoing business, ultimate economic ownership of the assets will not change, all entities involved are Australian residents for tax purposes, are considered small businesses and the assets being transferred are active. Information about the small business restructure rollover can be found by searching for "QC 48586" on ato.gov.au
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You do not carry on a business individually.
You own land.
The land was purchased in late19XX.
The land has been used in a primary production business since the date of purchase.
Since mid 20XX the primary production business has operated through a discretionary trust.
Prior to this it was operated through a partnership, with the partners being you and your spouse.
The trading trust was established in mid 20XX and has a corporate trustee which was also established in mid 20XX.
You are the appointer of the trust.
You and your spouse are the directors and shareholders of the trustee company.
The business carried on by the trading trust is solely for the benefit of you and your family.
You and your family are the beneficiaries of the trading trust.
The trading trust is financially dependent on the land and you are financially dependent on the trading trust and act in concert to ensure that the trading trust is run in such a way as to meet their financial requirements.
There is no formal lease in place in respect to the use of the land owned by you with the trading trust due to the close intertwined relationship between the land holder and trading trust.
The aggregated turnover for the trading trust is less than $XXX for the current and foreseeable future.
The land owned by you will be transferred to a new discretionary trust(s) with a corporate trustee.
You will be the appointer of each of the new discretionary trusts.
Each new discretionary trust established to hold the land will have a family trust election in place with you as the test individual.
You and your family will be beneficiaries of the new discretionary trusts.
All entities party to this restructure are Australian residents for tax purposes.
The land will continue to be used by the trading trust in the carrying on of its business activities.
The purpose of applying the restructure rollover is to:
· Provide further asset protection by separating the ownership of assets from you as you are integral to the trading trust;
· Enable's additional options with financiers to be negotiated over longer terms to assist in growth of the operations; and
· The ownership of the land will reflect current land holding structures utilised by the family.
Both the transferors and transferees will choose to apply the roll-over in relation to the assets transferred under the transactions.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 328-G
Income Tax Assessment Act 1997 Section 108-5(1)
Income Tax Assessment Act 1997 Section 152-10
Income Tax Assessment Act 1997 Section 152-40
Income Tax Assessment Act 1997 Section 328-125