The restructure rollover in Subdiv 328-G is a useful tool in the arsenal of tax concessions assisting small business.
Subdiv 328-G
The new rules – new as in from 1 July 2016 – allow small businesses to defer gains or losses that would otherwise be made from transferring business assets from one entity to another as part of a genuine restructure.
What was Before
The ‘older’ rollover provisions in Subdiv 122-A and 122-B are quite rigid. Moreover they only work in one direction – into a company. And don’t cover depreciating assets and trading stocks.
More Flexibility
The small business restructure rollover in Subdiv 328-G is a lot more flexible. They allow small business to change their legal structure without facing income tax liability on the transfer of those assets.
Subdiv 328-G works either way – from or to a company or other entity. There are no restrictions on the type of entities that can use the provisions.
And it doesn’t just cover capital gains but also depreciating assets and trading stocks. Making it easier for small business owners to restructure.
No Change in Ultimate Economic Ownership
One important condition of subdivision 328-G is that the ultimate economic ownership of the assets must not change.
And it must be a genuine business restructure. And not a hidden sale.
So it should be a bona fide commercial arrangement undertaken to enhance business efficiency. And not an artificial restructure done for tax reasons.
The transferred assets should continue to be used in the business. And not be part of a divestment.
The restructuring result should be what the owners would have adopted in the first place if they had obtained appropriate professional advice when setting up business.
Any or All
Not all assets of the business are required to be transferred in order to access the rollover relief.
If an entity has two different businesses for example, it could rollover the assets for one business to a new entity. And retain the other assets in the existing entity.
Resident Small Business
Both the transferor and the transferee must be small business entities. Both must choose the optional rollover. And all parties to the transfer must be residents of Australia.
Active Assets
The assets transferred must be active assets.
Held by Another Entity
The roll over may also be available for assets that are used by small business entity but held by an entity connected with the small business entity, an entity for which the small business entity is an affiliate or, if the small business entity is a partnership, a partner of that partnership.
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Last Updated on 23 March 2020
