1 Will Person P (P) and Person H (H) satisfy the meaning of affiliate under section 328-130 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Yes. Question 2 Will the farming land meet the active asset test under section 152-35 of the ITAA 1997 for the purpose of applying the small business CGT concessions? Answer Yes. This ruling applies for the following period : Year ended 30 June 20XX Year ended 30 June 20XX The scheme commences on: 1 July 19XX
Person P (P) and Person H (H) purchased property (the property) over XX years ago. P and H hold their interests as tenants in common. P and H reside on the property. They have been living together and operating the business together for over XX years ago. P and H share accounts together as well as share the load of house-hold tasks including consultation of the property. The property was purchased to operate a business. Over the period of ownership, P has conducted their business as a sole trader. H does not draw a wage from the business and has their own paying job. H's salary supplements the business income as required when the business cannot. Some of H's duties in the business included preparation, assistance, harvesting, loading, maintenance, delivery, and other jobs as necessary. In the period of holding the property, P has undertaken to produce a number of crops. The business required annual audits and received a letter of compliance to remain certified for each year of operation. P must keep records of all activity on the asset including cultivation, slashing, mulching, spraying and planting. Particular regard is given to methods of weed and pest control.
For each item harvest, P was required to give every outgoing consignment its own batch number. The batch number allows the tracking of each lot of produce back to its origin. To adhere to the Australian standards, the business required annual audits. P has held Certification for over XX years of operations and has not failed an audit in any of the years. P invested a further 50 hours in an application to achieve a nationally recognised standard as accredited by the Australian Government. P had regular soil analyses done to assist with his business. The turnover of the operation has fluctuated over the years. The previous income year aggregated turnover for P was below $X million. The current income year expected aggregated turnover for P is below $X million. There were a number of factors that impacted yield throughout the period including: • Weather and natural disasters • Supply of incorrect products • Crop disease • Damage caused by animals • Carer responsibilities • Illness. P and H intend to sell the property.
Income Tax Assessment Act 1997 subsection 152-10(1AA) Income Tax Assessment Act 1997 section 152-35 Income Tax Assessment Act 1997 section 152-40 Income Tax Assessment Act 1997 section 328-130 Detailed reasoning Question 1 Meaning of affiliate Section 328-130 of the ITAA 1997, explains an affiliate is an individual that, in relation to their business affairs, acts or could reasonably be expected to act in accordance with your directions or wishes, or in concert with you. Whether a person acts, or could reasonably be expected to act, in accordance with the taxpayer's directions or wishes, or in concert with the taxpayer is a question of fact dependent on all the circumstances of the particular case. No single factor will necessarily be determinative. In certain circumstances an individual c