Aggregated turnover and connected entities

There are a number of tax concessions where eligibility is based on your aggregated turnover being below certain thresholds.

In some circumstances you may want to seek the ATO discretion to ignore your controlling interest in another entity you don’t actually ‘control’, because it impacts your aggregated turnover and eligibility to claim tax concessions.

To help you understand the matters the ATO consider when determining whether or not to exercise their discretion, they’ve published a new Taxation Determination with illustrative examples.

But first, let’s clarify some key terms:

  • Aggregated Turnover – is your annual turnover, plus the annual turnovers of any business entities that are your affiliates or connected with you.
  • Connected with you – an entity (or entities) connected with you is an entity that you control or controls you or where both you and the entity are controlled by a third entity. These may be based in Australia or overseas.

The Commissioner’s discretion on ‘control’

The question of ‘control’ is central to determining who is ‘connected with you’. You are considered to have control of an entity if you hold a control percentage of at least 40% in the entity. However, the Commissioner has the discretion to determine that you don’t control that entity if your control percentage is at least 40% but less than 50%.

Taxation Determination TD 2023/5 Income tax: aggregated turnover and connected entities – Commissioner’s discretion that an entity does not ‘control’ another entity explains that:

  • The ATO can only exercise the Commissioner’s discretion to ignore your controlling interest in an entity if we’re satisfied that another unrelated entity (not connected with you or your affiliates) actually controls it
  • responsibility for day-to-day conduct of an entity’s business doesn’t amount to actual control
  • a group of unrelated entities won’t necessarily ‘control’ an entity even if their accumulated control percentage is more than 50%.

Remember, our registered tax agents can help, feel free to contact our team.

Source: ATO Newsroom

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