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1 Are the individuals affiliates of The Estate Trust within the meaning of the term under section 328-130 of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. Question 2 If yes, what assets of the individuals are included in the maximum net asset value (MNAV) test in section 152-10(1)(c)(ii) of the ITAA 1997? Answer Not applicable. This ruling applies for the following periods Financial years ending 30 June 20xx and 30 June 20xx The scheme commences on 1 July 20xx

The Estate Trust (TET) owns a factory it is considering selling to an unrelated party. The only activity of TET is the lease of the factory. Adult Child A makes all decisions in relation to TET. A's parents are the individuals who are both retired and do not carry on any business activity, nor do they have an active role in the operation of TET.

Income Tax Assessment Act 1997 section 328-130 Income Tax Assessment Act 1997 subsection 995-1(1)

All references are to the Income Tax Assessment Act 1997 unless otherwise stated Detailed reasoning Division 328 contains a range of concessions for small business entities The definitions in section 995-1(1) informs us that affiliate has the meaning given by section 328-130. Section 328-130(1) states (underlining added): 328-130(1) An individual or a company is an affiliate of yours if the individual or company 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. 328-130(2) However, an individual or a company is not your affiliate merely because of the nature of the business relationship you and the individual or company share. Note: For small business relief purposes, a spouse or a child under 18 years may also be an affiliate under section 152-47.

Example: A partner in a partnership would not be an affiliate of another partner merely because the first partner acts, or could reasonably be expected to act, in accordance with the directions or wishes of the second partner, or in concert with the second partner, in relation to the affairs of the partnership. Directors of the same company, or the company and a director of that company, would be in a similar position. An individual or company must carry on business to be an affiliate of another entity. The individuals are: retired, and do not personally carry on any business activities Accordingly, neither individuals are affiliates of CET.