How to Calculate Aggregated Turnover

Calculate aggregated turnover by adding your client’s annual turnover to the relevant turnover of connected entities and affiliates, then removing the specified internal dealings. Establish who belongs in the calculation before comparing the result with the threshold for the tax test you’re applying.

What Aggregated Turnover Includes

Aggregated turnover combines the client’s business turnover with the turnover of entities connected with it and its affiliates. Annual turnover is ordinary income derived in the ordinary course of carrying on a business. Expenses do not reduce that amount.

Your client’s accounts are the starting point. They do not answer which other entities belong in the calculation or which amounts must be removed. The ATO’s turnover guidance explains the business-income calculation and aggregation steps.

Keep these measures separate when preparing the working paper.

Measure	What it measures	Why it cannot replace aggregated turnover
Annual turnover	One entity’s ordinary business income, subject to the turnover rules	Other relevant entities and internal-dealing exclusions still need consideration
Accounting profit	Income less accounting expenses	Turnover is measured before expenses
Taxable income	Assessable income less allowable deductions	Tax adjustments and deductions produce a different amount
GST turnover	Supplies measured under the GST rules	Its scope, exclusions and measurement period differ
Consolidated accounting revenue	Revenue for the financial-reporting group	Tax control and affiliate rules can include different entities and periods

A client with no connected entities or affiliates generally has aggregated turnover equal to its annual turnover. That conclusion still needs an entity assessment. A separate Australian Business Number does not establish that another business can be left out.

Identify Connected Entities and Affiliates

Identify connected entities through control, and affiliates through how they conduct their own business affairs. Start with an entity structure chart, then test the rights and actual conduct behind it.

Connected Entities

An entity is connected with your client if either controls the other, or the same third entity controls both. For a company, consider voting power and rights to distributions of income or capital. A control percentage of at least 40% can establish control, counting the client’s affiliates’ interests where required.

For a partnership, test rights to its net income or capital. For a trust other than a discretionary trust, examine rights to income or capital distributions. Read the governing documents and any rights to acquire interests instead of relying only on the percentage shown in an ownership summary.

A discretionary trust has separate control tests. One examines whether the trustee acts, or could reasonably be expected to act, according to the entity’s or its affiliates’ directions or wishes. Another examines distributions in any of the four preceding income years. A distribution of at least 40% of income or capital to the entity and its affiliates can establish control, subject to the statutory exceptions.

Trace indirect control through each controlled entity. For example, a client that controls a holding company can also control that company’s subsidiary. The indirect-control rule has exceptions for specified entities, including certain listed companies and publicly traded unit trusts.

The Commissioner has a discretion for a control percentage of at least 40% but below 50% where another entity or qualifying group controls the entity. Do not treat that discretion as an automatic exemption. Record its basis and any determination relied on. The ATO’s control guidance sets out the different tests.

Affiliates

An affiliate is an individual or company that acts, or could reasonably be expected to act, according to your client’s directions or wishes in its own business. Acting in concert with your client in that business can also establish the relationship. A trust or partnership cannot itself be an affiliate under the general definition, although it can have affiliates.

Review commercial agreements alongside who makes business decisions and how the businesses operate. A family relationship can be relevant evidence, but it does not decide the general affiliate test. A shared accountant or ordinary supplier relationship alone does not establish it either. The affiliate relationship is directional, so one business being another’s affiliate does not automatically make the reverse true.

Include foreign entities when they meet the connected-entity or affiliate rules. Use their relevant worldwide business income. For small business capital gains tax concessions, also examine the additional grouping rules for passively held assets and other statutory deemed relationships.

Keep evidence of inclusion and exclusion. For each entity, record the control or affiliate test, supporting documents and the period for which the relationship exists.

Calculate Turnover Without Double Counting

Calculate each entity’s annual turnover, then remove only the amounts excluded by the aggregation rules. Use the client’s income year throughout the calculation.

1. Establish the client’s income year and the tax test. Identify whether you need actual turnover, prior-year turnover or a permitted current-year estimate.
2. List relevant entities and their connection or affiliate periods. Include entities that qualify at any time during the client’s income year, even if they leave before year end.
3. Calculate annual turnover for each entity over the matching period. Adjust accounting revenue for turnover inclusions, exclusions and any required arm’s-length substitution.
4. Remove the relevant entity’s income derived while it is neither connected nor an affiliate. Separately remove qualifying dealings between the client and relevant entities, and between relevant entities.
5. Total the remaining amounts. Reconcile each exclusion to source records, then compare the aggregate with the threshold for the named tax test.

Where another entity has a different accounting year, obtain figures covering your client’s income year. Do not simply add its most recent accounts. ATO Determination TD 2021/7 explains this period alignment, including for foreign entities.

Decide Which Income Enters Annual Turnover

Include ordinary business income such as trading-stock sales, service fees and interest from business bank accounts. Include foreign business income and compensation replacing ordinary business earnings where it has that character.

Exclude GST charged on transactions, business borrowings and proceeds from selling business capital assets. The ATO also excludes insurance proceeds for loss or destruction of a business asset and repayments of farm management deposits. Retail fuel sales have a specific statutory exclusion.

Classify a receipt by its character. An asset dealer’s trading-stock sales differ from a service business selling its used capital equipment. Income can also be assessable without being ordinary business income for annual turnover.

For dealings with associates, substitute the ordinary income that an arm’s-length dealing would produce where required. Then apply any aggregation exclusion. Being an associate and being a connected entity or affiliate are different tests.

If an entity carries on business for only part of an income year, annual turnover requires a reasonable estimate for a full year. That rule differs from excluding another entity’s income outside its connection period. An existing business acquired during the year does not become a newly commenced business merely because its owner changes.

Worked Aggregated Turnover Calculation

This fictional example uses a client company, a connected company and an affiliate company. All three carry on business throughout the income year. The amounts below are ordinary business income after GST and other annual-turnover adjustments.

The client acquires 75% of the connected company’s ordinary voting shares after eight months. It has no earlier connection or affiliate relationship with that company. The affiliate company acts in concert with the client in its own business throughout the year, and that conclusion is documented.

Example Reconciliation

Calculation	Amount	Treatment
Client company’s annual turnover	$2,400,000	Includes $50,000 of service income from the affiliate
Connected company’s annual turnover	$1,800,000	Includes income from before the acquisition and $200,000 of service income from the client after acquisition
Affiliate company’s annual turnover	$900,000	Relevant for the whole year
Total before aggregation exclusions	$5,100,000	Sum of the three annual turnovers
Less connected company’s income before connection	($1,100,000)	Derived during the first eight months, with no relevant relationship
Less connected company’s service income from the client	($200,000)	Internal dealing during the four-month connection period
Less client’s service income from the affiliate	($50,000)	Internal dealing during the affiliate period
Aggregated turnover	$3,750,000	$5,100,000 less $1,350,000

Assume there are no other relevant entities or excluded dealings. The $1,100,000 pre-connection amount excludes the later $200,000 service income, so the adjustments do not overlap.

The incorrect calculation is $5,100,000, which retains income outside the connection period and qualifying internal income. The correct calculation is $3,750,000. Remove the income included in turnover once, without also deducting the payer’s expense from the aggregate.

Use transaction records for the connection-period adjustment. Multiplying annual turnover by four-twelfths would give a different result here because income is not earned evenly throughout the year.

Apply the Threshold for the Right Test

Apply the aggregated turnover threshold for the particular concession or company-tax test. Passing a turnover test does not establish every other eligibility condition.

Turnover Thresholds Compared

Test	Aggregated turnover threshold	Income-year basis and further conditions
General small business entity test	Less than $10 million	Prior-year actual turnover, a permitted current-year estimate or current-year actual turnover under the applicable rules
Small business income tax offset	Less than $5 million	Modified small business entity test, with separate rules for the individual’s eligible net small business income
CGT small business entity test	Less than $2 million	Modified small business entity test, with separate active-asset and other concession conditions
Base rate entity test	Less than $50 million	Actual aggregated turnover for the same income year, plus the company’s separate passive-income test

The small business 50% reduction has a legislated exception for 2027-28 and later assessments. It removes the $2 million limb for that reduction, while retaining the general small business entity test and other basic conditions. For a substituted accounting period, match the assessment year to the Act’s application provision.

The ATO’s small business concessions instructions explain the different turnover thresholds. Some concessions extend to entities below $50 million, but that does not make $50 million the general small business entity threshold.

Under the general test, estimate current-year turnover using circumstances known at the start of the income year, or when the business starts. The estimate route is unavailable where the business operated in both preceding years and reached the threshold in both. Current-year actual turnover offers another route, but cannot support every concession that requires eligibility earlier in the year.

For the fictional client, $3,750,000 is below $10 million and $5 million, but above the $2 million CGT small business entity threshold. A company cannot claim the individual small business income tax offset merely because its turnover is below $5 million. Failing the CGT turnover route also does not rule out a separate maximum net asset value route.

A small business restructure rollover needs its own eligibility assessment. A turnover result alone does not establish a genuine restructure or satisfy the other transfer conditions.

Base Rate Entity Aggregated Turnover

A company’s base rate entity assessment uses actual aggregated turnover for the income year being assessed, worked out at year end. Prior-year turnover cannot replace it. The company must also have no more than 80% of its assessable income as base rate entity passive income.

The passive-income percentage uses the company’s own assessable income. It does not combine the passive income or assessable income of connected entities and affiliates. ATO Ruling LCR 2019/5 explains both tests.

The fictional client passes the turnover limb at $3,750,000. Determine its passive-income percentage separately before using the company tax calculator to estimate tax.

Record the Return’s Aggregated Turnover Range

Select the aggregated turnover range using the relevant entity’s return instructions for the income year you’re lodging. Preserve the exact calculated amount in the working paper even where the return asks only for a category.

The 2026 company return instructions require item 8 label X when the company relies on aggregated turnover for the listed concessions. Those concessions include instant asset write-off, small business CGT concessions and small business restructure rollover. The instructions permit either 2025-26 or 2024-25 turnover for the range selection. That reporting choice does not change a concession’s eligibility rules or the current-year base rate entity test.

For the fictional client, assume it relies on a listed concession using its current-year $3,750,000 calculation and is not a significant global entity. Its relevant company-return entries are as follows.

Company Return Example

Field	Entry	Reason
Item 8, label X: aggregated turnover range	A	$0 to less than $7.5 million
Item 8, label Y: aggregated turnover amount	Leave blank	The example is below $1 billion and is not a significant global entity

The company return instructions require an actual amount at label Y for turnover of $1 billion or more, or significant global entity status. They prescribe rounding to the nearest $100 million. Do not put the example’s $3,750,000 into label Y simply because an amount field exists.

For other entity types, use the partnership return instructions or trust return instructions. They specify different item and label locations. Do not carry company-return labels across to another return.

Retain the entity list and ownership chart, control evidence, affiliate assessment, aligned source accounts, adjustment schedule and the income year used. Record the reviewer’s conclusion on the named eligibility test separately from the selected return range. Before lodging, another preparer must be able to reproduce both the $3,750,000 result and category A from that file.