Edited version of private advice

Authorisation Number: 1052353775192

Date of advice: 3 February 2025

Ruling

Subject: CGT - affiliates

Question

Is Person A an affiliate of you as defined by section 328-130 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

After reviewing the relevant factors and conditions, pursuant to section 328-130 of the ITAA 1997 the Commissioner will consider Person A to be your affiliate. This is on the basis of your close family relationship, the business dependence on the use of the property without consideration, the absence of formal arrangements, and the consultation regarding business decisions. It is reasonable to conclude that Person A acted in accordance with your directions or wishes in relation to the affairs of the business.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

In the relevant financial year, you sold your farmland.

Your close family member, Person A, has been managing the farming business as a sole trader on your farmland since a specific period. Prior to this, Person A operated the business together with Person B, their spouse.

The aggregated turnover of Person A's business is less than $2 million in the relevant financial year.

Upon Person B's passing in a specified year, you inherited the interest in the farmland through Person B's will. Since then, you have been assisting Person A in various capacities within the business.

There are no formal agreements between you and Person A, but you maintain a close family and business relationship.

Person A's business relies significantly on the use of your farmland and has been actively conducting farming activities on it since Person B acquired the land in a specified year. Currently, due to old age, Person A suffers from mobility, respiratory, and other health issues.

You have allowed Person A to use your farmland rent-free.

You have been heavily involved in Person A's business and Person A relies on your directions in connection with the day to day activities of the farm.

You assist Person A with various farming activities, including hiring employees, overseeing machinery maintenance, organising supplies, and managing livestock needs. Additionally, you handle emergency responses and problem-solving tasks as they arise.

You received a contracting fee for your services, but this did not cover all of the activities you assist Person A with.

You reported your contracting income on your income tax return using a business schedule and Person A claimed a tax deduction on the personal income tax return for the payments made to you.

From the perspective of the suppliers and customers, you mainly managed the farm and provided regular advice, while Person A handled the administrative aspects of the business.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 328-130

Income Tax Assessment Act 1997 section 328-G