4.12.1.50 Associate Rule

Date of effect

This topic has effect to designated private trusts and designated private companies from 1 January 2002.

Associate rule

Control of the assets (1.1.A.290) and income of a designated private trust or a designated private company may be established by looking at the level of informal control individuals or members of a couple, whether of the same sex or a different sex, hold through their associates.

Explanation: An associate is a person/s or entity/s who could be expected to act in accordance with the individual's or couple's wishes.

Associates of an individual may include:

  • a relative,
  • an entity,
  • an entity that is a declared associate of the individual,
  • a business partner of the individual involved in the same business,
  • if a business partner of the individual is an individual - the partner (1.1.P.85) or child of that business partner,
    • Explanation: The reference to 'partner' relates to a person who is a member of a couple, whether of the same sex or a different sex.
  • a trustee of a trust,
  • a company, where the company is influenced by the individual or other entities that are associates of the individual, or
  • a company, in which a majority voting interest is held by the individual or other entities that are associates of the individual.

The fact that a person is identified as an associate does not mean that they would automatically be attributed with the assets or income of the entity.

Example: If a person was not the source of the structure's funds, or in control of the structure, and had never received any benefit from the structure, they would not be attributed with control.

Note: If a person can show that a genuine gift or a genuine loan has been made the associates rule will not apply. Nor will the associate rule apply if an income support recipient genuinely resigns their involvement in a trust or company.

Act reference: SSAct section 8(1)-'income', section 1207A-'entity', section 1207B Relatives, section 1207C Associates, section 1207E Majority voting interest in a company, section 1207N Designated private companies, section 1207P Designated private trusts, section 1207Q(3) Source test (Controlled private companies), section 1207V(3) Source test (Controlled private trusts)

Policy reference: SS Guide 4.12.5.10 Recognised & Non-Recognised Liabilities of a Controlled Private Trust or Controlled Private Company, 4.12.6.20 Gifts to a Private Trust or Private Company, 4.12.9.10 Resignations from a Controlled Private Trust or Controlled Private Company On or After 01/01/2002

Last reviewed: 6 February 2017