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Edited version of private advice
Authorisation Number: 1051583623846
Date of advice: 2 October 2019
Ruling
Subject: Capital gains tax
Question
Is the Trust or any of your relatives an affiliate of yours under section 328-130 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No.
If you are not a small business entity (SBE), are not a partner in a partnership that is a SBE and do not satisfy the maximum net asset value test, you may still be able to access the small business CGT concessions for your asset if it is used in a business carried on by a SBE that is your affiliate or an entity connected with you.
An affiliate is defined in section 328-130 of the ITAA 1997 as being an individual or a company that acts or could reasonably be expected to act, in accordance with your directions or wishes, or in concert with you, in relation to the affairs of the business of the individual or company.
Trusts, partnerships and superannuation funds cannot be your affiliates. Therefore the Trust cannot be your affiliate.
To qualify as an affiliate, the individual or company must carry on a business. An entity that is not carrying on a business cannot be an affiliate of another entity under section 328-130 of the ITAA 1997.
As none of your relatives carry on a business as an individual, none of them can be an affiliate of yours.
Also, an individual cannot be an entity connected with you and based on the information provided, the Trust is not an entity connected with you (section 328-125 of the ITAA 1997).
However, you may wish to investigate whether you satisfy the maximum net asset value test.
Further information in relation to the basic conditions for the small business CGT concessions is available on our website ato.gov.au by searching for 'QC 52266'.
This ruling applies for the following period
Year ending 30 June 2020
The scheme commenced on
1 July 2019
Relevant facts
You own land.
You were a partner in a partnership which used your land to carry on a business.
Since leaving the partnership, you have had no involvement in the business operations.
The land is now used by the Trust to operate a business.
Your relatives are involved with the Trust but do not carry on a business as individuals.
You are not a SBE.
With regard to the Trust:
· you are not the appointor or guardian,
· you are not a director or shareholder of the trustee company, and
· you have not received a capital or profit distribution from the Trust in the previous four years.
Relevant legislative provisions
Income Tax Assessment Act 1997 - Division 152
Income Tax Assessment Act 1997 - Section 328-130
Income Tax Assessment Act 1997 - Section 328-125