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Edited version of private advice
Authorisation Number: 1051567338526
Date of advice: 16 August 2019
Ruling
Subject: Small business concessions - affiliate test
Question 1
Is Company A an affiliate of yours for the purposes of section 328-130 of the Income Tax Assessment Act 1997 (ITAA 1997), in respect of the disposal of the Property?
Answer
Yes.
Company A is considered to be an affiliate of yours as they are considered to act, or could reasonably be expected to act in accordance with your directions or wishes, or in concert with you, in relation to their business affairs. Further information on affiliates can be found by searching 'QC 52285' on ato.gov.au
Question 2
Do you meet the basic conditions for the small business CGT concessions under section 152-10 of the ITAA 1997 in respect of the disposal of the Property?
Answer
Yes.
You satisfy the basic conditions for the following reasons. A CGT event will happen in relation to a CGT asset of yours that will result in a gain. Additionally you satisfy the maximum net asset value test as the net assets of you and your connected entities and affiliates do not exceed $6 million. You also satisfy the conditions of the active asset test as the property has been used by an affiliate to carry on a business for the entirety of the ownership period. Further information on the basic conditions can be found by searching 'QC 44192' on ato.gov.au
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
Company A operates a business (the Business).
Company A's shares were held as follows:
(a) 60% of the shares held by Person A; and
(b) 40% of the shares held by Person B
Company A operates the Business out of special purpose premises, leased from you.
You are a holding entity that leases your real property premises to Company A.
Your shares were held as follows:
(a) 25% ownership be Person A;
(b) 25% ownership by Person B; and
(c) 50% ownership by Entity D
The Fund is a regulated complying self-managed superannuation fund that had Person A and Person B as its only members.
You purchased the Property for use in the Business by Company A.
The Property was specially fit out for Company A to conduct their Business operations from that time. You allowed Company A the use of the Property.
The Property has been used by Company A to carry on the Business at all times while it was held by you.
Rent was charged at an arm's length value. No formal lease agreement was put in place.
You sold the Property.
The total sum of your assets, as well as your affiliates and connected entities, does not exceed $6 million.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-10
Income Tax Assessment Act 1997 section 328-130
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