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Edited version of private advice
Authorisation Number: 1052216348360
Date of advice: 20 February 2024
Ruling
Subject: CGT - small business concessions
Question
Has Entity A been an affiliate of Individual A and Individual B since they purchased a property in 2015?
Answer
Yes. Entity A is considered to be an affiliate of yours under section 328-130 of the ITAA 1997. On the basis of your close family relationship with its directors and shareholders and its dependency on the use of your land and labour at below market value. Further your involvement in its business decisions, it is reasonably expected that Entity A would act in accordance your directions or wishes, or in concert with you in relation to the affairs of its business.
This ruling applies for the following period:
Year ended 30 June 2024
Year ended 30 June 2025
The scheme commenced on:
1 July 2023
Relevant facts and circumstances
Individual A and Individual B are partners in a partnership.
The Partnership does not trade in its own right, but owns X properties, including a commercial property which was purchased in 20XX.
The property is informally leased to Entity A, and has been actively used in its trading business since the date of purchase.
At the date of the property purchase, the shares in Entity A were owned directly 25% each by Individual A and their 3 adult children. In 20XX, one child sold their 25% of the shares in Entity A to Individual B, and Individual B replaced their child as a company director.
Throughout the property ownership period, Individual A and Individual B have both been heavily involved in all significant decisions relating to Entity A, as their children often deferred to their experience and leadership regarding business operations.
The use of the property has been an integral part of the Entity A's business operations.
Individual A and B have experience relevant to the business operations. They are both involved in the day-to-day business operations.
Individual A and B are planning to sell the commercial property in the next 12 months.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 328-125
Income Tax Assessment Act 1997 section 328-130
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