What is a genuine restructure of an ongoing business? 

August 2016

The ATO has finalised another law companion guideline dealing with the small business restructure roll-over rules.

One of the main conditions that needs to be met in order for the roll-over relief to apply is that transactions to part of a genuine restructure of an ongoing business. This is a question of fact and will depend on the circumstances in each case. 

• Asset protection;
• Maintaining key employees; 
• Raising new capital; 
• Simplifying the taxpayer's affairs. 

However, if it appears that the restructure is being undertaken for the following reasons then the ATO is likely to conclude that the condition is failed: 

• The restructure is being done to facilitate the sale of the business or a business asset; The restructure is undertaken to facilitate succession planning strategies; or 
• The transaction is undertaken to facilitate the extraction of wealth from the business assets. 

The LCG also provides comments on a number of other issues, including the potential application of the general anti-avoidance rules in Part IVA, the application of the active asset requirement and some examples dealing with the requirement that the restructure does not cause a material change in the underlying economic ownership of the relevant assets. 

The ATO confirms that the rules are not intended to apply to the transfer of shares in a company or units in a trust.