4.12.10.40 Concessions for Income Support Recipients Surrendering Control of a Private Company or Private Trust before 01/04/2002

Date of effect

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

Controllers of private trusts or companies who surrendered control between 01/01/2002 & 31/03/2002

If a controller of a private trust or private company wanted to surrender control of the trust or company, they could do so prior to 1 April 2002 and have any possible deprivation assessed under the rules in force prior to 1 January 2002. This concession was announced by the Minister for Family and Community Services on 20 December 2001. The change did not delay the implementation of the new trusts and companies rules, which came into effect on 1 January 2002. Income support recipients who are assessed as controllers of trusts or companies on or after 1 January 2002 and who have their payments reduced or cancelled as a result of the new rules, will not have their payments backdated to 1 January 2002 if they subsequently surrender control of their private trust or private company before 1 April 2002. Centrelink will only restore payment from the date Centrelink is satisfied that the income support recipient has genuinely surrendered control.

Example: Wally is a farmer who had a $500,000 farming property in a discretionary trust. Wally had been planning to transfer control of this trust to his son prior to 1 January 2002 in order to continue to be eligible for the Age Pension he was receiving. However, Wally failed to make the necessary changes in time and as a result his pension was cancelled on 1 January 2002, when the trust assets were attributed to him as the trust controller. Wally decided that he would still like to transfer control of the farming trust to his son; he does this and supplies the necessary documentation to Centrelink on 28 February 2002. Wally will not be considered a controller of the trust from 28 February 2002 and his pension can be restored FROM THIS DATE. As Wally surrendered control of the trust prior to 1 April 2002, he will not be assessed with deprivation as a result of surrendering control of the trust under the rules in force from 1 January 2002; he will instead be assessed as if control of the trust had been surrendered prior to 1 January 2002.

Concession not to apply in certain circumstances

Delegates should keep in mind that this 3-month concession is granted at the discretion of the delegate. Where a delegate believes that an income support recipient may gain an unfair advantage by exploiting the concession, the concession should not apply.

Example: Justine had $100,000 worth of shares in a discretionary trust which she controlled. Justine did not surrender control of the trust on 1 January 2002 and was attributed with control of the trust. Justine also owned a $150,000 investment property in her own name, which she transferred to the trust on 20 January 2002. No deprivation was incurred in this process, as Justine was the 100% attributable stakeholder of this trust. On 15 February 2002, Justine transferred control of the trust (now with net assets of $250,000) to her son, and claims that she should not be assessed with deprivation as a result of this transfer as she was accessing this concession. In this instance, the concession would not apply. Justine's actions in transferring other assets to the trust before surrendering control of the trust indicate that she was fully aware of the new trusts and companies rules prior to their implementation, and was only taking this course of action to circumvent the income and assets test. Justine will be assessed as having deprived herself of a $250,000 asset in this instance.

Last reviewed: 11 August 2014