Australia: ATO guidance on Commissioner’s discretion on “control” of a connected entity
Commissioner has the discretion to determine that a taxpayer doesn’t control an entity if their control percentage is at least 40% but less than 50%
ATO guidance on Commissioner’s discretion
The Australian Taxation Office (ATO) released guidance that clarifies the Commissioner’s discretion on “control” of a connected entity when it comes to determining a taxpayer’s aggregated turnover and connected entities.
According to the ATO, a taxpayer is considered to have control of an entity if they hold a control percentage of at least 40% in the entity. However, the Commissioner has the discretion to determine that a taxpayer doesn’t control that entity if their control percentage is at least 40% but less than 50%.
In a taxation determination (TD 2023/5), the ATO explains that:
- They can only exercise the Commissioner’s discretion to ignore a taxpayer’s controlling interest in an entity if they are satisfied that another unrelated entity (not connected with the taxpayer or their 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%.
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