The small business restructure rollover election is made in the tax returns of the transferor and the transferee, because no ATO election form exists. Subdivision 328-G of the Income Tax Assessment Act 1997 lets eligible small businesses move active assets into a new structure without immediate income tax.
Eligibility requires aggregated turnover under $10 million, Australian residency on both sides, and unchanged ultimate economic ownership. The transfer must form part of a genuine restructure of an ongoing business, and a three-year safe harbour settles that question automatically. Written records made at the time of the transfer carry the election through any later ATO review.
Is There an ATO Election Form for the Restructure Rollover?
No ATO election form exists for the small business restructure rollover. Business owners search for the form constantly, and the search has no destination. Section 103-25 of the tax law governs CGT choices. A choice is made by the day the tax return is lodged, and the prepared return evidences the choice. The restructure rollover follows the same rule. The transferor and the transferee each choose the rollover, and each return is completed as though the rollover applies.
The absence of a form raises the stakes on documentation. A lodged form proves a decision on a date. A return prepared “consistently with the rollover” proves far less on its own. We build the evidence trail separately, and the trail is covered below.
Who Qualifies for the Small Business Restructure Rollover?
The restructure rollover is available where both parties are small business entities or connected with one, both are Australian residents, and ownership does not change. The eligibility conditions are set out below:
- Small business status: the transferor and transferee each carry on business with aggregated turnover under $10 million. Connection with, or affiliation with, such an entity also qualifies.
- Residency: both parties are Australian tax residents.
- Active assets: the transferred assets are active assets of the business. CGT assets, depreciating assets, trading stock, and revenue assets all qualify.
- Ultimate economic ownership: the same individuals own the assets in the same proportions before and after the transfer.
- Genuine restructure: the transfer forms part of a genuine restructure of an ongoing business.
Aggregated turnover counts connected entities and affiliates, and family groups connect easily. A trading entity under $10 million on its own figures sometimes fails once a connected property trust or second business joins the calculation. We test aggregation before anything else, because a failed turnover test ends the analysis.
How Is the Rollover Choice Made and Evidenced?
A valid restructure rollover election rests on both parties choosing the rollover and on contemporaneous written records proving the choice. The choice itself happens through lodgement. The transferor reports no capital gain, balancing adjustment, or assessable amount on the transferred assets. The transferee records the assets at their rollover cost. Consistent returns on both sides complete the election.
The written evidence matters as much as the returns. The records we prepare for every restructure rollover are listed below:
- A restructure memorandum stating the commercial reasons for the new structure, dated before the transfer.
- Directors’ or trustee resolutions in both entities recording the decision to choose the rollover.
- The transfer documents: business sale agreement, asset transfer deed, or declaration, executed at the transfer date.
- A schedule of transferred assets with rollover costs, tax values, and acquisition dates.
- Market valuations where land, goodwill, or intellectual property moves.
ATO reviews of restructures arrive years after the event. A file built at transfer time answers the review in a week. A file reconstructed from memory invites amended assessments.
What Makes a Restructure Genuine?
A genuine restructure delivers a commercial benefit to the ongoing business, rather than preparing the business for sale or extracting wealth. The legislation leaves the term undefined, and Law Companion Ruling LCR 2016/3 supplies the ATO position.
The ruling accepts restructures driven by asset protection, retaining key staff through equity, raising capital, and cutting administrative burden. The business continues through the new structure, with the same assets in active use and operations unbroken.
The ruling rejects three patterns. A restructure undertaken as a step toward selling the business fails. An intergenerational wealth transfer dressed as a restructure fails. An arrangement built to extract value tax-effectively fails.
Lower overall tax is an acceptable outcome of a genuine restructure, and an unacceptable purpose for a contrived one. The stated commercial driver in the restructure memorandum decides which side of that line the ATO places the transaction.
How Does the Three-Year Safe Harbour Work?
The safe harbour deems a restructure genuine where three conditions hold for three years after the transfer. The conditions are set out below:
- No change occurs in the ultimate economic ownership of the significant transferred assets.
- The significant assets remain active assets of the business.
- Private use of the significant assets stays insignificant.
The safe harbour converts a judgement call into a compliance checklist. A business that holds the structure, keeps trading the assets, and avoids private use for three years never argues “genuine restructure” with the ATO. A sale of the business inside the window forfeits the safe harbour and reopens the question.
Anti-avoidance rules still apply. An arrangement designed to satisfy the safe harbour with a sole or dominant tax purpose loses the benefit, with no time limit on review. We diarise the three-year window on every file and clear any proposed sale against the position first.
How Does Ultimate Economic Ownership Work With Family Trusts?
Transfers involving a discretionary trust satisfy the ownership test only through the family trust rules. Ultimate economic ownership requires the same individuals to hold the assets in approximately the same proportions after the restructure.
A sole trader incorporating takes 100 per cent of the shares, and any share issued outside that ownership breaks the test. Discretionary trust beneficiaries hold no fixed entitlement, so a standard discretionary trust fails the proportion test on its face.
The alternative test rescues family groups. A transfer to or from a trust with a family trust election preserves ultimate economic ownership where the assets stay within the family group. A family trust election carries permanent consequences, including family trust distribution tax on distributions outside the group.
The election is therefore a decision in its own right. Asset moves between trusts and other entities also raise transfer-level CGT questions. Our guide to the CGT rollover for asset transfers to trusts covers that pathway in detail.
What Are the Tax Outcomes of a Valid Election?
A valid restructure rollover election transfers the assets at their existing tax values with no immediate income tax on either side. The transferor disregards capital gains, balancing adjustments on depreciating assets, and assessable amounts on trading stock and revenue assets. The transferee inherits the rollover cost of each asset, so the built-in gain carries into the new structure rather than disappearing. Pre-CGT assets keep their pre-CGT status, with the exception of pre-CGT revenue assets.
Two timing details deserve attention. The transferee is treated as acquiring each asset on the transfer date for the 12-month CGT discount, so the discount clock restarts. Capital losses created on membership interests by the restructure are disregarded for both parties. The rollover defers tax, and defers only income tax. The next section covers what sits outside.
How Does the Restructure Rollover Compare With the Small Business CGT Concessions?
The restructure rollover defers tax on an internal reorganisation, while the small business CGT concessions reduce or remove tax on a disposal. The two regimes run on different thresholds. The restructure rollover uses $10 million aggregated turnover, against $2 million turnover or $6 million net assets for the concessions.
A business owner changing structure uses Subdivision 328-G. A business owner selling, including to family, reaches for the concessions. Our comparison of the small business CGT concessions vs rollover relief maps the full decision. The foundations of the concession sit in our quick guide to the small business restructure rollover. The present article covers the execution layer that guide leaves open.
Which Taxes Sit Outside the Restructure Rollover?
The restructure rollover switches off income tax alone, leaving stamp duty, GST, and Division 7A untouched. Transfer duty is a state matter. Land and dutiable business assets attract duty at market value in several jurisdictions, with separate state relief sometimes available. GST on the transfer usually resolves through the going concern exemption, and the exemption demands a written agreement.
Division 7A carries the sharpest execution trap: assets leaving a company for inadequate consideration are payments to shareholders or associates, and payments become deemed dividends. The rollover gives no protection from that outcome. Our guide to Division 7A and CGT rollover deemed dividends explains how transfers out of companies are structured safely.
Why Act on a Restructure Rollover Before 2028?
Eligible small businesses hold a working rollover today, while the Budget’s trust restructure relief waits on legislation and a 2027 start. The 2026-27 Federal Budget announced a 30 per cent minimum tax on discretionary trusts from 1 July 2028. A separate three-year trust rollover window opens on 1 July 2027. Those measures remain announcements. Subdivision 328-G is settled law with a decade of ATO guidance behind the provision.
A family group under the $10 million threshold, with a genuine commercial driver, restructures now on known rules rather than waiting for an unlegislated window. Groups above the threshold, or lacking a commercial driver beyond the trust tax, wait for the 2027 relief by design.
What Mistakes Defeat a Restructure Rollover Election?
Unilateral choices, missing documentation, and ownership slippage defeat more restructure rollover elections than the eligibility rules do. The common failures are listed below:
- One-sided elections. Both the transferor and the transferee choose the rollover, and one consistent return without the other leaves the election incomplete.
- Paper written after the fact. A restructure memorandum dated two years after the transfer persuades nobody.
- Ownership drift inside three years. New shareholders, changed unit holdings, or distributions outside the family group break the safe harbour.
- Aggregation blindness. Connected entities push turnover past $10 million while each entity alone sits under the line.
- Succession framing. A restructure explained as handing the business to the children fails the genuine restructure test on the ATO’s own examples.
Frequently Asked Questions
Where is the small business restructure rollover election form?
No form exists. The election is made by lodging both parties’ tax returns consistently with the rollover and keeping written records of the choice.
Does the restructure rollover need to be chosen by both entities?
Both the transferor and the transferee choose the rollover. A single entity applying the rollover alone leaves the election defective.
What is the turnover limit for the restructure rollover?
Aggregated turnover under $10 million qualifies an entity as a small business for Subdivision 328-G. Connected entities and affiliates count toward the figure.
Does the restructure rollover trigger stamp duty?
Stamp duty sits outside the rollover and follows each state’s rules. Land and dutiable business assets attract duty at market value, with separate state relief available in limited cases.
Does a discretionary trust qualify for the restructure rollover?
A discretionary trust qualifies through a family trust election, with assets staying inside the family group. The election carries permanent consequences and deserves separate advice.
What happens on a business sale within three years of the restructure?
A sale inside the window forfeits the safe harbour and reopens the genuine restructure question. The restructure then needs defending on the general test, and a restructure undertaken as a step toward sale fails that test.
What Is the Next Step on a Restructure Rollover Election?
A restructure executed on settled law today beats a restructure waiting on next year’s legislation. Book your free 30-minute strategy session with one of our directors. We test the turnover aggregation, draft the evidence file, and sequence the transfer around duty and Division 7A. Blackwattle Tax helps growing Australian businesses change structure with specialist, director-level attention.
Schedule a FREE 30-minute consultation today to discover how we can help you make strategic decisions and streamline your business operations.
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Disclaimer: We endeavour to make sure the information provided in this guidance is up to date and accurate. Please note, that the information is only intended to be a guide, with a general overview of information. This guidance is not a comprehensive document and should not be interpreted as legal advice or tax advice. The information is general in nature. You should seek the assistance of a professional opinion for any legal and tax issues related to your personal circumstances.