4.1.4 Deprivation Related to Trusts & Private Companies before 01/01/2002

Note

This topic only relates to:

  • gifts made to trusts and companies before 1 January 2002, and
  • disposals of assets (1.1.D.210) from trusts and companies before 1 January 2002.

For gifts made to trusts and companies on or after 1 January 2002, or disposals of assets by trusts and companies on or after 1 January 2002, please refer to 4.12.10.

Summary

Deprivation provisions MAY apply IF:

  • an income support recipient gives an asset (1.1.A.290) or income to a trust (1.1.T.180) or private company (1.1.C.220), OR
  • a private company, discretionary or non-discretionary trust disposes of an asset AND this action reduces the value of the income support recipient's share/s in the company or trust.

The provisions for disposed of assets and income (1.1.D.220) differ. In addition, the amount of disposition MAY differ for:

  • discretionary trusts (1.1.D.200),
  • non-discretionary trusts (1.1.N.100), and
  • private companies and trusts.

This topic discusses:

  • when an income support recipient is considered to have disposed of an asset to a discretionary or non-discretionary trust,
  • assessing asset disposal by an income support recipient to a discretionary trust,
  • assessing asset disposal by an income support recipient to a non-discretionary trust,
  • when an income support recipient is considered to have disposed of income to a discretionary, non-discretionary trust or private company,
  • assessing assets disposed of by a private company IF the income support recipient is a shareholder, and
  • assessing assets disposed of by a discretionary or non-discretionary trust IF the income support recipient is a beneficiary.

Information on how to calculate the TOTAL deprivation amount for an income support recipient is provided in the referenced topic.

Act reference: SSAct section 8(1)-'income'

Policy reference: SS Guide 4.1.1 General Provisions of Deprivation

Disposal of assets to a discretionary or non-discretionary trust

An income support recipient disposes of an asset to a trust IF they:

  • give the asset to the trust, AND
  • do not receive adequate financial consideration (1.1.A.55) in exchange.

Assessing asset disposal to a discretionary trust

The following table explains how to calculate the amount of disposition for assets disposed of to a discretionary trust.

Note: The assessable value of an income-producing asset EXCLUDES the value of any income actually produced. Deeming applies to amounts above the allowable disposal limit.

If the income support recipient is… And… Then the amount of disposition is…
SOLE beneficiary of the trust assets, has beneficial ownership of ALL the trust assets,

nil: there is no deprivation.

Explanation: The income support recipient's interest in the trust assets increases by the value of the disposed of asset.

one of several beneficiaries of the trust assets, is a partial beneficiary of the trust assets, the value of the asset.
NOT a beneficiary of the trust, - the value of the asset.

Assessing asset disposal to a non-discretionary trust

The following table explains how to calculate the amount of disposition for assets disposed of to a non-discretionary trust.

Note: The assessable value of an income-producing asset EXCLUDES the value of any income actually produced. Deeming applies to amounts above the allowable disposal limit.

If the income support recipient is… Then the amount of disposition is…
SOLE beneficiary of the trust assets,

Nil: there is no deprivation.

Explanation: The income support recipient's interest in the trust assets increases by the value of the disposed of asset.

one of several beneficiaries of the trust assets,
  • the value of the asset, MINUS
  • the income support recipient's interest in the asset.

Example: An income support recipient is one of 4 beneficiaries of a trust. The income support recipient gives a trust an asset valued at $100,000. This means that the income support recipient's interest in the asset will be $25,000 ($100,000 DIVIDED BY 4). The amount of disposition is therefore $75,000 ($100,000 MINUS $25,000).

NOT a beneficiary of the trust, the value of the asset.

Disposal of income to a discretionary or non-discretionary trust

An income support recipient has disposed of income IF they:

  • gave income to a trust AFTER 1 June 1984, AND
  • did not receive adequate financial consideration in return.

Assessing disposed of income

IF an income support recipient disposes of income to a trust, normal income deprivation provisions apply.

Policy reference: SS Guide 4.1.3 Deprivation of Assets & Income - Effect on Income, 4.4 Deeming Provisions

Disposal of assets BY a private company

Deprivation provisions apply IF an income support recipient is a shareholder in a private company AND:

  • the company disposes of an asset for less than its market value (1.1.M.40), AND
  • the delegate is satisfied that the income support recipient influenced the decision to dispose of the asset.

Explanation: It is assumed that an income support recipient has influenced the decision IF the:

  • income support recipient is the sole shareholder, OR
  • company accounts show that the income support recipient's interest in the company is substantial or controlling.

The amount of disposition is the reduction in the value of the income support recipient's shareholding.

Note: The assessable value of an income-producing asset EXCLUDES the value of any income actually produced. Deeming applies to amounts above the allowable disposal limit.

Policy reference: SS Guide 4.1.3 Deprivation of Assets & Income - Effect on Income, 4.4 Deeming Provisions

Disposal of assets BY a discretionary trust or non-discretionary trust

Deprivation provisions apply IF an income support recipient is a beneficiary of a discretionary or non-discretionary trust AND:

  • the trust disposes of an asset for less than its market value, AND
  • the delegate is satisfied that the income support recipient influenced the decision to dispose of the asset.

Explanation: It is assumed that an income support recipient has influenced the decision IF the:

  • income support recipient is a beneficiary of the trust, AND
  • trustee of the trust, AND
  • the disposal was NOT a result of instructions in the trust deed.

The amount of disposition is the reduction in the value of the income support recipient's interest in the trust assets.

Note: The assessable value of an income-producing asset EXCLUDES the value of any income actually produced. Deeming applies to amounts above the allowable disposal limit.

Policy reference: SS Guide 4.1.3 Deprivation of Assets & Income - Effect on Income, 4.4 Deeming Provisions

Last reviewed: 11 August 2014