Private ruling: Borrowing of family trust's asset
Date of advice: 19 May 2026
Published: 3 August 2026
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Was the Taxpayer's spouse a deemed affiliate of the taxpayer pursuant to Section 152-47 of the Income Tax Assessment Act 1997 from July 20XX to June 20XX? | A1: No.

Relevant facts and circumstances: 1. The Taxpayer owns a property which was acquired less than X years ago. 2. The property was a X and at all times since the property was acquired, it has been used in a business conducted by the Taxpayer. 3. The turnover of the business in 20XX income year was $xx,xxx plus insurance proceeds of $x,xxx. 4. Approximately X% of the property is used in this business. The property is also used as a residence by a family member, with them not paying any rent. However, the family member assists with the business on the property. 5. The Taxpayer sold the X in the 20XX income year, deriving a capital gain and causing a CGT event to occur. Borrowed Asset 6. From July 20XX to June 20XX, the Taxpayer had borrowed an all-terrain vehicle (ATV) to operate on the farmland for business purposes from their spouse's family trust, the Spouse's Family Trust (the Family Trust). Spouse's Roles 7. The Taxpayer's spouse (the Spouse) operates substantial business operations in entities they control. The Spouse's businesses operate through various discretionary trusts. The annual turnover of these businesses exceeds $X, and their value likely exceeds $X. 8. The Spouse controls the Family Trust. 9. The Spouse does not conduct businesses under their own name. Assumptions 10. The Taxpayer does not control the Family Trust or any of the other discretionary trusts referred to in paragraph 7, pursuant to section 328-125(3) or (4) of the ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 section 152-47 | Income Tax Assessment Act 1997 section 328-110 | Income Tax Assessment Act 1997 section 328-130

Reasons for decision: Summary: 11. Subsection 328-130(1) of the Income Tax Assessment Act 1997 [1] states that: 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. 12. Neither a spouse nor a child is automatically an individual's affiliate. [2] 13. Subsection 328-130(1) makes it explicit that the 'affiliate' definition is only to be considered 'in relation to the affairs of the business' of the relevant individual or company. Therefore, an entity that does not carry on their own business cannot be an 'affiliate' for the purposes of section 328-130. 14. In this case, the Taxpayer spouse does not carry on a business in their own right. Therefore, the Taxpayer's spouse is not their affiliate under Subsection 328-130(1). 15. However, the note to section 328-130 states that f or small business relief purposes, a spouse or a child under 18 years may be an affiliate under section 152-47. | Detailed Reasoning - Small business relief: 16. Section 152-5 explains Subdivision 152-A, which sets out the basic conditions for small business relief. It explains the two major conditions are: (a) the entity must be a CGT small business entity or a partner in a partnership that is a CGT small business entity, or the net value of assets that the entity and related entities own must not exceed $6,000,000; and | Detailed Reasoning - (b) the CGT asset must be an active asset.: 17. Subsection 152-10(1) explains that a capital gain you make may be reduced or disregarded under this Division if the following basic conditions are satisfied for the gain: a) A CGT event happens in relation to a CGT asset of yours in an income year; b) The event would have resulted in the gain; c) At least one of the following applies i) You are a CGT small business entity for the income year ii) You satisfy the maximum net asset value test (section 152-15) iii) You are a partner in a partnership that is a CGT small business entity for the income year and the CGT asset is an interest in an asset of the partnership; iv) The conditions mentioned in subsection (1A) and (1B) are satisfied in relation to the CGT asset in the income year d) The CGT asset satisfies the active asset test (section 152-35) | Detailed Reasoning - 18. Per subsection 152-10(1AA) and 328-110(1), an entity is a CGT small business entity for an income year if:: a) It carries on a business in the current year, and b) One or both of the following applies i) It carried on a business in the income year (the previous year) before the current year and its aggregated turnover for the previous year was less than $X and ii) Its aggregated turnover for the current year is likely to be less than $X (subject to the exception in 328-110(3)) | Detailed Reasoning - 19. There is also an additional rule based on aggregated turnover worked out as at the end of the current income year under subsection 328-110(4).: 20. Section 152-10(1A) headed 'Passively held assets - affiliates and entities connected with you' provides that the conditions in the subsection are satisfied in relation to the CGT asset if: (a) your * affiliate, or an entity that is * connected with you, is a * CGT small business entity for the income year; and (b) you do not carry on a * business in the income year (other than in partnership); and (c) if you carry on a business in partnership - the CGT asset is not an interest in an asset of the partnership; and (d) in any case - the CGT small business entity referred to in paragraph (a) is the entity that, at a time in the income year, carries on the business (as referred to in subparagraph 152-40(1)(a)(ii) or (iii) or paragraph 152-40(1)(b) ) in relation to the CGT asset. 21. The Explanatory Memorandum (EM) to the Tax Laws amendment (2009 Measures No. 2) Act 2009 (the Bill) that inserted 152-10(1A) explained, at paragraph 2.18, that subsection (1A) was inserted so that a taxpayer who owns a CGT asset (and does not carry on a business other than as a partner in partnership) that is used in a business by the taxpayer's affiliate or an entity connected with the taxpayer is able to access the small business CGT concessions via the $X aggregated turnover test (small business entity test). | Detailed Reasoning - 22. Subsection 152-35(1) provides that a CGT asset satisfies the active asset test if:: a) You have owned the asset for 15 years or less and the asset was an active asset of yours for a total of at least half of the period specified in subsection (2); or b) You have owned the asset for more than 15 years and the asset was an active asset of yours for a total of at least 7½ years during the period specified in subsection (2). | Detailed Reasoning - 23. Subsection 152-40(1) defines that a CGT asset is an active asset at a time if, at that time:: a) You own the asset (whether the asset is tangible or intangible) and it is used, or held ready for use, in the course of carrying on a business that is carried on (whether alone or in partnership) by: i) You; or ii) Your affiliate; or iii) Another entity that is connected with you | Detailed Reasoning - 24. Section 152-47 of the ITAA 1997 headed "Spouses or children taken to be affiliates for certain passively held CGT assets" states:: (1) This section applies if: (a) one entity (the asset owner) owns a * CGT asset (whether the asset is tangible or intangible); and (b) either: (i) the asset is used, or held ready for use, in the course of carrying on a business in an income year by another entity (the business entity); or (ii) the asset is inherently connected with a business that is carried on in an income year by another entity (the business entity); and (c) the business entity is not (apart from this section) an affiliate of, or connected with, the asset owner. (2) For the purposes of this Subdivision, in determining whether the business entity is an affiliate of, or is connected with, the asset owner, take the following to be affiliates of an individual: (a) a spouse of the individual; (b) a child of the individual, being a child who is under 18 years. (3) If an entity is an affiliate of, or connected with, another entity as a result of subsection (2), then the spouse or child mentioned in that subsection is, in addition, taken to be an affiliate of the individual for the purposes of this Subdivision, and for the purposes of sections 328-110to328-125to the extent that they relate to this Subdivision. Example: The spouse or child mentioned in subsection (2) is taken to be an affiliate of the individual for the purposes of working out which entities are affiliates of or connected with entities under section 152-48 . (4) To avoid doubt, subsection (2) applies: (a) for the purposes of reducing or disregarding, under this Division, any capital gain from any CGT asset; but (b) only while: (i) a spouse remains a spouse; or (ii) a child remains a child who is under 18 years. | Detailed Reasoning - 25. The EM to the Bill (that also that introduced 152-47) explains:: 2.33 The amendments repeal subsection 152-40(1A) and insert a rule that treats an individual's spouse or child (under 18 years of age) as an affiliate of the individual for the purposes of determining whether the individual or an entity in which the individual has an interest, or is a beneficiary of, is eligible for the small business CGT concessions where one entity owns a CGT asset and: • that asset is used, or held ready for use, in the course of carrying on a business by another entity; or • is inherently connected with a business carried on by another entity. [Schedule 2, items 11 and 14, subsections 152-47(1) and (2)] | Detailed Reasoning - 26. The EM depicts the application of the affiliate rule in context to section 152-47.: 27. Example 2.3 of the EM provides a diagram showcasing how an affiliation can be created under subsection 152-47(1). In this example, Philip and Crystal are spouses. Horse Farm Pty Ltd owned by Phillip does not operate a business and owns land. Pig Farm Pty Ltd, which is owned by Crystal, operates a business, which is conducted on the land owned by Horse Farm Pty Ltd. Notably, the CGT asset in contention is owned by Horse Farm Pty Ltd but is being used by the separate entity Pig Farm Pty Ltd in its business, linking the two entities together, and requiring Horse Farm Pty Ltd to engage with the provisions in Subdivision 152 dealing with passively held assets, in determining its eligibility for the small business concessions in connection with a CGT Event occurring to its land. Once section 152-47 is engaged in this way, it also applies for testing if Carrot Pty Ltd is connected with Horse Farm Pty Ltd, because the taxpayer and the spouse jointly own Carrot Pty Ltd, owning 30% and 70% respectively 28. It is clear from the scheme of Subdivision 152-A and the EM that accompanied the Bill that inserted section 152-47, that section 152-47 will only be engaged where a taxpayer owns a CGT asset that is used in a business by another entity. As explained in the EM, the provision is designed to apply to assets that are passively held, and ensures that such taxpayers can access the small business CGT concessions via the $X aggregated turnover test, or satisfy the active asset test, notwithstanding that the relevant CGT asset is not used in a business carried on by the taxpayer directly. 29. In circumstances where the entity that owns the relevant CGT asset is the entity that uses the asset in carrying on its own business, section 152-47 will not be engaged for determining that entity's eligibility for small business relief in relation to that CGT asset. Section 152-47 will not be engaged where there is not an entity seeking to access small business relief for an asset that is passively held. | Detailed Reasoning - Application to your circumstances: 30. In this case, the Taxpayer ran a business on the property at all times since the property was acquired. 31. Subsection 152-47(4) provides that subsection 152-47(2) applies for the purposes of reducing or disregarding, under Division 152, any capital gain from any CGT asset. There is nothing in these facts that would indicate that subsection 152-47(2) is engaged for the purpose of reducing or disregarding a gain from a CGT asset. 32. In contrast to example 2.3 in the EM, the Family Trust does not utilise the farmland to conduct a part of their business. Without the utilisation of the CGT asset of the property by another entity, paragraph 152-47(1)(b) does not apply, as the asset is not used, held for ready for use, for carrying on a business by another business entity or inherently connected with a business that is carried on by another entity in the income year. 33. Although the Taxpayer borrowed the ATV from the Family Trust to be used in their business, it is not the CGT asset in contention. 34. As the property was used solely in carrying on the Taxpayer's business, and not by another entity - subsection 152-47 does not apply, therefore it would not deem the Taxpayer's spouse to be their affiliate. 35. As the answer to the first question is 'no', there is no necessity to answer question 2 of the private ruling application. [1] All legislative reference from here will be in relation to the Income Tax Assessment Act 1997 unless otherwise stated. [2] Paragraph 2.38 of the Explanatory Memorandum to the Tax Laws Amendment (Small Business) Bill 2007 (EM).