Moving from sole trader to company: the small business restructure rollover

Every successful sole trader hits the same wall: the ABN that was perfect at $60,000 of income is costing real money and carrying real risk at $250,000. The fix — moving into a company or trust — used to come with a nasty surprise: transferring your own business to your own company is, technically, selling it, and the goodwill you built could trigger CGT without a single dollar changing hands. The small business restructure rollover (Subdivision 328-G) exists precisely to remove that surprise.

What the rollover does

From 1 July 2016, eligible small businesses can transfer active assets — goodwill, plant and equipment, trading stock, depreciating assets — between entities as part of a genuine restructure with no income tax consequences at the time of transfer. The receiving entity steps into your shoes: your cost bases, your acquisition dates for most purposes, your depreciation schedules. The tax isn’t forgiven; it’s carried across, which for a growing business is exactly what you want.

The three tests that matter

Aggregated turnover under $10 million. Yours plus connected and affiliated entities. Most sole traders considering this move clear the bar easily.

A genuine restructure of an ongoing business. The rollover is for businesses changing how they operate — limiting liability, taking on staff, preparing for growth — not for dressing up a sale or stripping value before a divorce. Helpfully, the law includes a safe harbour: keep the transferred assets in use in the business, with no significant private use and no divestment, for three years, and the “genuine” question answers itself.

No change in ultimate economic ownership. The same people must economically own the assets before and after. Sole trader Dave transferring to a company owned 100% by Dave: clean. Transferring to a company owned 50/50 with a new business partner: not a rollover — that half is a real disposal. Discretionary trusts get a special path: with a family trust election in place, assets held for the same family group can satisfy the test even though a discretionary trust has no fixed owners.

What the rollover doesn’t do

This is where restructures go wrong in practice, so, plainly:

Stamp duty is separate. State duty can apply to transfers of some business assets (and always to land). Several states offer restructure concessions and SA abolished duty on most non-land business assets — but it’s a state-by-state check before signing, not a discovery after.
GST needs its own answer — usually manageable (transfers between registered entities as a going concern, or asset-by-asset treatment), but it must be papered.
Contracts, licences, finance and insurance don’t move by magic. Customer agreements, trade licences, equipment finance and your PI/public liability policies all need novation or reissue in the company’s name.
Employees transfer with entitlements. New employer, continuity of service recognised, super and STP re-established from the first payday.

The right order of operations

Done well, a sole-trader-to-company move is a fortnight of admin wrapped around one good decision. The sequence we run: model the numbers first (sometimes the honest answer is “stay put another year”); design the structure — often a company owned by a family trust, so future profits and an eventual sale have flexibility; register the new entity with the right share structure (a company is $1,090 ex GST plus ASIC’s fee); document the restructure — transfer agreement, rollover choice, market values, minutes; then move the operations: bank accounts, GST and PAYG registrations, payroll, insurances, contracts, and letting customers know the invoices will look different.

Twelve months later, the business is paying company tax on retained profits, the owner has a salary and dividends instead of everything landing on one return, and the family home isn’t standing behind every contract the business signs.

If your business has outgrown its ABN, start with the structuring review — we’ll model the rollover against your actual numbers — and the company registration service handles the new entity end to end.

Questions we get about this

Why not just start the company and keep trading?

Because the business's assets — plant, goodwill, the ABN's contracts — legally belong to you as sole trader. Using them through a company without properly transferring them creates a mess of ownership, and transferring them without a rollover can trigger CGT on goodwill you didn't know you had.

Does the rollover cost anything in tax later?

The company inherits your cost bases — the gain isn't erased, it's carried forward. If the company later sells the business, tax is calculated as if it had owned the assets all along. For most owners that's a fair trade for zero tax at restructure time.

What does "no change in ultimate economic ownership" mean for a family trust?

Normally the same humans must own the assets economically before and after. A discretionary trust can't show fixed ownership, so the law provides an alternative — if the trust has a family trust election and the assets stay within that family group, the test can still be satisfied.

What about stamp duty?

The rollover is Commonwealth income tax law; duty is state law. Several states offer exemptions or concessions for genuine restructures (and SA abolished duty on most non-land business asset transfers), but it must be checked for your state before anything is signed — not after.

Where to from here: Company & trust registration · Structuring & succession — or start online and ask us directly.

General information only — it doesn’t consider your circumstances and isn’t financial product advice. Get advice on your own position before acting; that’s literally what we’re for.