Private ruling: Affiliates - partners in a partnership
Date of advice: 23 March 2023
Published: 15 May 2023
Ruling period: Period ending 30 June 20XX | Period ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the individual partners of the Partnership affiliates of the Company? | A1: Yes. There is a close family relationship between the parties, with the directors and shareholders of the Company also being partners in the Partnership. In addition, the arrangements between the Company and the individuals are on an informal and verbal basis. There is no formal agreement in place in respect of the land owned by the Company, and the Company allows the individuals to use the land for no consideration. As such, the Commissioner accepts that the individual partners are affiliates of the Company.

Relevant facts and circumstances: Person A and Person B are brothers. Person A is married to Person C. Person D is the child of Person A and Person C. Person B is married to Person E. Person F is the son of Person B and Person E. Person A and Person B are the directors of the Company. The share capital of the Company is held as follows: • Person A and Person B each hold XX A class shares, and • Person C and Person E each hold YY B class shares. Under the Company's constitution, the A class shareholders have rights to dividends, rights to capital on winding up and voting rights. The B class shareholders have rights to dividends, and rights to capital on winding up, but no voting rights. The Company owns land. The Partnership is a small business entity and carries on a business using the land. The partners are Person A, B, C, D, E and F, all with equal interests. Use of the land is granted to the partners by the Company for nil consideration. There is no written lease, licence or other documents relating to the use of the land by the individual partners. The agreement is verbal only. The Company has no activities aside from making the subject land available to the Partnership. The Company and the Partnership share the same bank account.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 328-G | Income Tax Assessment Act 1997 subsection 328-130(1)