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Ruling
Subject: Affiliates
Question
Is a relative an affiliate of the Estate under section 328-130 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2011
Year ended 30 June 2012
The scheme commences on:
1 July 2010
Relevant facts and circumstances
An individual owned a property.
A relative had been living with the individual until their passing.
The relative of the deceased is carrying on a farming business on the property.
The individual purchased the property in their name as the relative had encountered financial difficulties in the past.
The individual provided financial guidance and advice in regards to the farming business.
Before their passing, the individual also helped out on the farm.
There were no formal agreements in place between the relative and the individual.
The property is now held by the Estate.
The business has a turnover of less than $2 million.
Reasons for decision
According to the Advanced guide to capital gains tax concessions for small business 2010-11 an affiliate must be an individual or a company and, in relation to their business, they act or could be reasonably expected to act in accordance with your directions or act in concert with you. For example:
· 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 reasonable 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.
After consideration of the facts and circumstances in this case, including the lack of formal agreements, the close family relationship and the actions of the parties, it is accepted that the individual is an affiliate of the Estate.
Additional information
This ruling has not considered your eligibility for the small business concessions. You should ensure that you satisfy the basic conditions and the other conditions relevant for each concession. More information is available in the publication Advanced guide to capital gains tax concessions for small business 2010-11 (NAT 3359), which is available on our website www.ato.gov.au.