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Edited version of private advice
Authorisation Number: 1051888316457
Date of advice: 20 August 2021
Ruling
Subject: CGT subdivision 126-G rollover
Question
If the Fund transfers two of the members' interests in the Fund to another fund established for those two members, will subdivision 126G rollover apply?
Answer
No.
This ruling applies for the following period periods:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are the trustee of a self-managed superannuation fund, settled in 19XX.
The members of the fund are:
A and their spouse, B; and
C and their spouse, D.
The members are contemplating a restructure of the Fund to better facilitate the retirement interests of the members.
The members of the fund are contemplating a restructure of the Fund to better facilitate the retirement interests of the four members.
The balance of the fund is $X,XXX,XXX, comprising cash, shares and commercial property.
The respective members each have a different percentage interest in the fund and each asset thereof.
The proposed restructure is that the Fund will transfer C and D's respective interests in the Fund to another fund established for their benefit. The members' proportionate interests in the CGT assets will be preserved.
A Subdivision 126-G roll-over may be chosen for a CGT asset if the following criteria are met:
(a) a trustee of a trust (the transferring trust) transfers a CGT asset to another trust (the receiving trust)
(b) the receiving trust has no CGT assets immediately before the transfer, other than small amounts of cash or debt;
(c) just after the transfer, both the transferring trust and receiving trust have the same beneficiaries and the receiving trust has the same classes of membership interests that the transferring trust had just before, and has just after, the transfer time; and
(d) the sum of the market value of each beneficiary's membership interests of a particular class in both the transferring and receiving trusts is substantially the same before and after the transfer.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 126-G
Reasons for decision
Application to your circumstances
According to the information you have provided, the beneficial ownership of the CGT assets will not change as they will continue to be held for the beneficiaries in the same proportionate interests. However, just after the transfer time, each of the trusts will not have the same beneficiaries. The identity of the beneficiaries and percentage of ownership will not be identical for each trust.
Therefore, subparagraph 126-225(1)(c)(i) of the ITAA 1997 will not be satisfied and the roll-over option is not available.