Commonly controlled businesses

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​A person or persons are considered to have a controlling interest in each of two or more businesses if that person has (or those persons acting together have):
  • a controlling interest in one business under any one of the following situations; and also
  • have a controlling interest in another business under the same or another of the following situations. ​​

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A person has a controlling interest where: 

  • ​any director of the corporation is entitled to exercise a majority in voting power at meetings of directors; 

  • a director is accu​stomed or under an obligation (formal or informal) to act in accordance with the instructions of that person or those persons acting together; or 

  • ​that person or those persons exercise, control or substantially influence the exercise of more than  50 per cent of the voting power of the voting shares issued by the corporation. ​

A person/group of people has a controlling interest where that person or group of people: 

  • ​controls or substantially influences the exercise or more than 50 per cent of the capital of the partnership; or 
  • is entitled to more than 50 per cent of the profits of the partnership.

A person has a controlling interest where:
  • ​a person (whether or not as a trustee of a trust) is the sole owner of the business; or 
  • two or more trustees of a trust have a controlling interest in a business of which they are the owners.​

A person has a controlling interest where that person (whether or not as the trustee of another trust) or those persons (whether or not as the trustees of another trust) are beneficiaries entitled to more than 50 per cent of the interests in the trust.
   
A beneficiary under a discretionary trust is deemed to be a beneficiary in respect of more than 50 per cent of the interests in  a trust.  

Where a person(s) is a member of two or more groups, all the members of those groups together constitute one group (section 74 of the Payroll Tax Act 2008). 

If a member of a group fails to pay any amount of payroll tax in respect to any period, every other member of that group is jointly and severally liable to pay any outstanding tax (section 81 of the Payroll Tax Act 2008).

An entity and a corporation form part of a group if the entity has a controlling interest in the corporation.
There are three types of controlling interest in a corporation:
  • direct interest

an entity has a direct interest in a corporation if it can directly or indirectly exercise the voting power attached to the voting shares in the corporation. An entity has a controlling interest in a corporation where the value of that direct interest exceeds 50​ per cent;

  • indirect interest ​

an entity holds an indirect interest in a corporation if the entity has a direct interest in another corporation and that second corporation holds a direct interest in the first corporation. For example, corporation ‘A’ holds a direct interest in corporation ‘B’ and in turn ‘B’ holds a direct interest in corporation ‘C’. Corporation ‘A’ therefore holds an indirect interest in corporation ‘C’. An entity has a controlling interest in a corporation where the value of that indirect interest exceeds 50 per cent;

  • aggregate interest

an aggregate interest exists if an entity has a direct and an indirect interest, or two or more indirect interests. The aggregate interest is the sum of the entities direct and indirect interests in the corporation. An entity has a controlling interest in a corporation where the value of that indirect interest exceeds 50 per cent. 

​ A set of associated persons may include direct family members and corporations in which that family has a major shareholding.  ​

 Example: 

 Mr Smith has a controlling interest in Able Pty Ltd of 80%

 Mr Smith has a direct interest in Charlie Pty Ltd of 50%

 Mr Smith has an indirect interest in Charlie Pty Ltd of 80% x 40% x 50% = 16%

 Mr Smith has an aggregate interest in Charlie Pty Ltd of 50% + 16% = 66%

 Mr Smith has a controlling interest in both Able Pty Ltd and Charlie Pty Ltd.
 
 See diagram and explanation below. 

  

 Able Pty Ltd and Charlie Pty Ltd constitute a group because Mr Smith has an interest of greater than 50 per cent in both of  them. Bravo Pty Ltd is not part of the group because the level of interest is 50 per cent or less. ​

If two or more shareholders are involved they must be associated persons as defined in section 73(4) of the Payroll Tax Act 2008 in order to use tracing interest provisions.

​If, in the example above, the shareholdings were held by two brothers, grouping would be established. If the shareholding wa​s held by two persons who are not associated, such as a grandfather and ​granddaughter, the tracing interest provisions would not apply (the related person definition does not extend to  grandparent/grandchild).

​ An entity and a corporation form part of a group if the entity has a controlling interest in the corporation. ​​

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