Partnership restructure and roll-overs
We find the rollovers your restructure qualifies for, and order the steps so you actually get them.Most of the tax on a partnership restructure is optional. Not all of it, but most, and the part that is optional is lost by doing the steps in the wrong order rather than by doing anything wrong. A partnership holds several different kinds of asset and each one has its own rules: goodwill and land are capital assets, trading stock is not, plant and equipment is treated differently again. Move them all at once without checking and you pay tax on some of what could have been rolled, which is a bill nobody budgeted for and nobody needed.
A cost you can weigh
The partners get a number for the restructure before committing, which is usually what the decision has been waiting on.
Every asset class checked
Goodwill, land, trading stock and plant each get their own treatment rather than being moved as one lot.
Sequence that holds up
The steps run in the order the concessions require, which is where most of the avoidable tax is lost.
Why is a partnership restructure more complicated than it looks?
A partnership is not a separate legal entity in the way a company is. Each partner holds a direct interest in every asset, so a restructure is really many simultaneous transfers rather than one. That is what makes it technical: the same transaction can involve a capital gain on goodwill, an income tax event on trading stock, and a balancing adjustment on depreciating plant, each with its own rollover and its own conditions. Rollovers exist for all of them, including the ones that let a partnership roll into a company. What they share is that none is automatic, several need an election, and all of them depend on the sequence being right.
What is a restructure rollover?
A rule that lets an asset move from one entity to another without triggering an immediate tax liability, deferring it instead until the asset is eventually sold. Different rollovers cover different situations, including moving a business into a wholly owned company and restructures between entities for eligible small businesses. Separate rules cover trading stock and depreciating assets. Whether any of them reach your assets is a question of fact.
What is a double-shuffle?
Shorthand for a two-step restructure, where partnership assets are first rolled into a company and the shares in that company are then dealt with to land the ownership where it is meant to end up. The two steps exist because doing it in one would fail a condition somewhere. Done properly it achieves a substantial structural change at a fraction of the tax cost of simply selling the assets across.
What happens to the trading stock?
It can go across at market value, which produces an immediate income tax liability, or at its tax cost under the trading stock provisions, which does not. The second is not automatic. It requires the conditions to be met and an election to be made, and it is one of the items most often missed because it sits outside the capital gains rules everyone is focused on.
How is a retiring partner's interest treated?
A partner’s interest is itself a capital asset, so the treatment depends on how the departure is structured: whether they sell to the incoming partners, are bought out by the remaining partnership, or receive assets in specie. Each route produces a different tax outcome for them, and small business concessions may be available depending on their circumstances. It is worth deciding the mechanism with the tax in view rather than after.
Get the analysis before anything moves
Send us the partnership deed and a list of what the partnership owns. We will tell you which rollovers your restructure qualifies for, what they save, and what has to happen in what order for you to get them.
The tax on this is mostly a question of sequence
You know the restructure makes commercial sense and you have stalled on it because nobody can tell you what it will cost. The uncertainty is not really about the law, it is about your particular mix of assets and which concessions reach them. Meanwhile the partner who wants out is still waiting, or the new structure that was needed for growth still is not there, and the delay itself has a cost that never appears on anyone’s estimate.
- We will inventory the partnership's assets and establish the tax character of each.
- We will set out the restructure options with the commercial and legal consequence of each.
- We will identify the rollovers and concessions available and the conditions attached to them.
- We will sequence the steps so those conditions are met at the right time.
- We will draft the restructure agreement, new deed or constitution and transfer instruments, and coordinate the elections with your accountant.
The partnership has to change and the tax is what is stopping you
The partnership has moved on from the arrangement it started with. A partner is retiring or wants their capital out, new people should be coming in, or the partnership should really be a company now so that liability is contained and a future sale is simpler. Everybody broadly agrees. What nobody can answer is what the change will trigger: whether the goodwill is taxed on the way across, what happens to the stock on hand, and whether the retiring partner’s interest is treated as a sale. So it sits there, agreed in principle and undone.
What's included in your partnership restructure service
- An asset inventory with the tax character of each item.
- Restructure options analysis with cost against each.
- Rollover and concession assessment, including trading stock and depreciating assets.
- A sequenced implementation plan.
- Legal documents, transfer instruments and accountant coordination.
What gets paid that did not have to be
Restructures that proceed without the asset-by-asset analysis produce the same avoidable outcomes again and again. Trading stock transferred at market value triggers income tax when an election could have moved it at cost. Plant and equipment treated as sold produces a balancing charge that a rollover would have deferred. Goodwill that qualified for a concession is taxed because nobody checked, or because a condition that had to be satisfied before the transfer was satisfied after it.
None of this is discovered at the time. It surfaces months later when the accounts are prepared and the tax return is due, and by then the transaction is complete and cannot be resequenced. The partners find out what the restructure actually cost at the point where nothing can be done about it, and the amount is almost always larger than the entire cost of getting the advice first.
From an unknown tax bill to a planned one
We start with an inventory, because the answer is asset by asset rather than transaction-wide. What the partnership owns, what each item is for tax purposes, what it cost and what it is worth now, and which partner’s interest attaches to it. That is the unglamorous part and it decides everything else.
Against that we map the rollovers and concessions that actually reach your assets, the conditions attached to each, and the order the steps have to run in for those conditions to be met at the right moment. You get the options with a cost against each, so the decision is commercial rather than speculative. Then we draft the restructure agreement, the new deed or constitution and the transfer instruments, and we work with your accountant so the elections are made and the reporting matches what was designed.
How we run the restructure
From an asset inventory to a restructure that is done and reported.Inventory the assets
We list what the partnership owns and establish the tax character, cost base and current value of each item.
Apply the rollovers
We identify which concessions reach your assets, what conditions attach, and what order the steps must run in to satisfy them.
Document and file
We draft the restructure agreement, new deed or constitution and transfer instruments, and coordinate the elections with your accountant.
Restructures run by Accredited Specialists in Business Law
Partnership restructures get deferred for years, and the reason is almost always the same: nobody will commit to a number, so the partners cannot weigh the decision. That is a solvable problem and it is where this work should start.
We have 2 Accredited Specialists in Business Law. We have run partner exits, partnership to company transitions and double-shuffles, and we work directly alongside your accountant, because the elections that carry most of the saving are made on their side of the file and depend on what we do on ours.
Our great lawyer guarantee
Six principles we hold to, whatever you bring us and however long it takes.
Take the time
We listen carefully to understand what you want to achieve, then step you through the advice and the documents.
Share our knowledge
We pass on as much as we can, so you can make your own informed decisions.
Stick to our knitting
We only do what we are good at, so you never pay for our learning.
Work as one team
Someone is always available to answer your question or point you the right way.
Fair pricing
A fixed or capped quote for advice and documents, so you do not carry the price risk.
It is your show
We are in it for a front row seat to witness your success, not for our egos.
Find out what the restructure would actually cost
Send us the partnership deed and a list of what the partnership owns. We will tell you which rollovers reach your assets, what the restructure would cost after them, and what order the steps have to run in for you to get them.
More on this area of law
Read more about partnership restructures, rollovers and business reorganisation, and how ADLV Law can help.
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