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11 Dec 09 On the CGT concessions for small business - who is an affiliate?

MEMBER 53 writes:

"I attended a seminar hosted by the ATO on the above topic yesterday. The presenter was purportedly a CGT specialist.

On the matter of the $6m net assets test, and $2m aggregated turnover test, the presenter discussed the meaning of the word 'affiliate', and provided worked examples. The presenter asserted that a tenant of a commercial premises is ‘an affiliate’ of the landlord (who also conducts its own separate business) because, and only because, the landlord can ‘influence’ the operation of the tenant’s business e.g. amount of rent paid; trading hours (his examples, not mine).

My understanding of the word ‘affiliate’ on the other hand is that an affiliate is “any individual or company that, in relation to their business affairs, acts or could reasonably be expected to act according to your directions or wishes, or in concert with you” (s 328-130(1) ITAA 1997).

The relationship between tenant and landlord is a contractual one. They each act in accordance with the terms of the contract, not the ‘wishes’ of one other – and certainly not in concert. It is a dramatic extension to suggest that a tenant and landlord, acting at arm’s length, and with no other relationship, could ever be considered to be affiliates of one another.

If the ATO presenter was right, the position defies common sense and logic.

If the ATO presenter was not right, why are we being burdened with presenters who seem to be interpreting the law at whim?"

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