Who is an affiliate?
This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
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An affiliate is an individual or company that, in relation to their business affairs, acts or could reasonably be expected to act:
- in accordance with you directions or wishes, or
- in concert with you.
Trusts, partnerships and superannuation funds cannot be your affiliates. However a trust, partnership or superannuation fund may have an affiliate who is an individual or company.
However, a person is not your affiliate merely because of the nature of a business relationship you and the person share.
For instance, if you are a partner in a partnership, another partner is not your affiliate merely because you act, or could reasonably be expected to act in accordance with their directions or wishes in relation to the affairs of the partnership.
Similarly, companies and trusts are not affiliates of their directors and trustees respectively, and vice versa, merely because of the positions held.
Whether a person acts, or could reasonably be expected to act, in accordance with the taxpayer's directions or wishes, or in concert with the taxpayer is a question of fact dependent on all the circumstances of the particular case. No one factor will necessarily be determinative.
Relevant factors that may support a finding that a person acts, or could reasonably be expected to act, in accordance with the taxpayer's directions or wishes, or in concert with the taxpayer, include:
- the existence of a close family relationship between the parties
- the lack of any formal agreement or formal relationship between the parties dictating how the parties are to act in relation to each other
- the likelihood that the way the parties act, or could reasonably be expected to act, in relation to each other would be based on the relationship between the parties rather than on formal agreements or legal or fiduciary obligations, and
- the actions of the parties.
Generally, another business would not be acting in concert with you if they:
- have different employees
- have different business premises
- have separate bank accounts
- do not consult you on business matters, and
- conduct their business affairs independently in all regards.
Are franchisees and franchisors affiliates?
Franchisees are not necessarily affiliates of the franchisor simply because of the franchise arrangement. Whether the franchisee acts in concert with the franchisor in respect of their franchise business depends on, among other things, the nature of the franchise agreement between them.
The affiliate relationship does not include the relationship between the 'controller' of an entity and the entity itself. The relationship in these situations is considered to be dictated more by obligations imposed by law, formal agreements and fiduciary obligations. Accordingly, companies, trusts and partnerships are not considered to be affiliates (and vice versa) of the various officers/persons/entities that are related to the company, trust or partnership in various capacities - for example, the trustees and beneficiaries of a trust, the directors and shareholders of a company and the partners in a partnership.
Are spouses and children affiliates?
Neither a spouse nor a child under the age of 18 years is automatically your affiliate. You must consider whether they are acting according to your directions or wishes, or in concert with you, in relation to their business affairs.
Example: not affiliates
Matt and Sandy are husband and wife. They share in the running of their household. Matt carries on a cleaning business with an annual turnover of $1.7 million while Sandy carries on a bakery with an annual turnover of $1.8 million.
They have nothing to do with each other's businesses. They have:
- separate bank accounts for their businesses
- different business locations
- their own employees.
Neither Matt nor Sandy controls the management of the other's business.
Even though Matt and Sandy are married neither is an affiliate of the other because they:
- do not act in concert with each other in respect of their businesses, and
- neither acts according to the directions or wishes of the other.
Therefore neither Matt nor Sandy has to include the annual turnover of the other's business in calculating the aggregated turnover of their own business.
Last modified: 30 Jun 2009QC 27964
The term 'small business CGT affiliate' applied for the 2006-07 and earlier years. There are differences in the meanings of affiliate and small business CGT affiliate. For 2006-07 and prior years spouses and children under 18 years were automatically small business CGT affiliates.
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