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Edited version of private advice
Authorisation Number: 1051624559676
Date of advice: 17 January 2020
Ruling
Subject: Small business capital gains tax concessions - affiliates - active asset
Question 1
Are Individual A and Individual B affiliates of Individual C?
Answer
Yes. Individual A and Individual B consulted Individual C on all significant business decisions regarding the business operations they carried on in partnership. There was no formal agreement or formal relationship between the parties and the arrangements between the parties were based on the close family relationship between them. Therefore, it is accepted that Individual A and Individual B are affiliates of Individual C. Further information can be found by searching QC 52288 on ato.gov.au.
Question 2
Was the property an active asset of the trust?
Answer
Yes. The trust and the partnership are connected entities as they are both controlled by the same third entity (Individual C). As the property was used in the business of an entity connected with the trust for a total of at least half of the ownership period and none of the exceptions apply, the property satisfied the active asset test. Further information can be found by searching QC 52272 on ato.gov.au.
This ruling applies for the following periods
Year ended 30 June 20XX to year ended 30 June 20XX
The scheme commences on
1 July 20XX
Relevant facts and circumstances
The deceased died in 20XX.
At the time of death the deceased owned a property.
The deceased left a will and appointed Individual C and other family members as executors and trustees of their estate.
The property was bequeathed to members of the deceased's family as tenants in common in equal shares provided always that Individual C be granted a life interest in the income from the property.
The property was held in a fixed testamentary trust that was established under the terms of the deceased's will.
For XX years the property was leased to Individual A and Individual B under an informal family arrangement. They carried on a primary production business on the property through a partnership as equal partners.
The partnership consulted Individual C on all significant business decisions.
Individual C surrendered their life interest in 20XX when the property was sold and transferred. A capital gain was made on the disposal.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-10
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 section 152-40
Income Tax Assessment Act 1997 section 328-110
Income Tax Assessment Act 1997 section 328-125
Income Tax Assessment Act 1997 section 328-130