4.12.11.30 Other Primary Production Issues

Date of effect

This topic has effect to controlled primary production trusts from 1 January 2002.

Summary

This topic contains information on:

  • private companies and private trusts,
  • the assets test hardship provisions, and
  • forgone wages.

The assets test hardship provisions

Primary producers who hope to qualify for payment under the assets test hardship provisions will be required to satisfy a number of qualification criteria relating to their land or other assets, some of which may include:

  • having primary production land (or other assets) on the market, and
  • having land farmed to full capacity.

Where attribution of land owned by a private company or private trust is made to an income support recipient, the recipient will need to satisfy any requirements with respect to this land for assets test hardship purposes as if they owned the land legally in their own right. Furthermore, land owned by a trust or company and attributed to our recipient will not be considered unrealisable simply because other attributable stakeholders do not consent to the property being put on the market (and this is required for the property to be sold) or the terms of the trust or company deeds prevent the sale of the property.

Example: Steve applied for NSA and had the claim rejected as he is over the assets test limit, largely due to being a 33% attributable stakeholder in a private company which owns a $300,000 investment property free and clear. Steve's 2 siblings are the other (non-beneficiary) attributable stakeholders. Steve has applied under the assets test hardship provisions arguing that the property is unrealisable as his siblings will not agree to the company selling the property (their consent also being required under the company constitution for this to happen), nor can Steve sell his share in the private company. Steve cannot claim that he is unable to sell the property and therefore able to access the assets test hardship provisions as this scenario would be one where the company constitution wording prevents the sale of the property.

Act reference: SSAct section 1208F When attributed asset is unrealisable

Policy reference: SS Guide 4.6.7 Asset Hardship Rules

Forgone wages

Primary producers may be eligible to access forgone wages provisions if they have had a close relative working the farm property for less than award wages. Access to forgone wages generally can only take place once the land in question is transferred to the close relative and the title deeds reflect this change in ownership. Where an income support recipient transfers their attributed private trust or private company land to a close relative in lieu of forgone wages, there may not be a change in the title deed for the property. This will most typically arise where the recipient signs over control of the private trust or private company to the close relative. The recipient may still have the amount of their gift reduced by accessing the forgone wages provisions in such cases, however in these cases forgone wages cannot be considered until control of the trust or company is formally signed over to the close relative.

Even though the close relative may have worked on the trust farming property while it was not assessed as an asset for Centrelink purposes (i.e. pre-1/1/2002), any unpaid (or partly paid) work done on the farm may be considered for forgone wages purposes. The amount of forgone wages should be calculated in the same way as for any other farming property (e.g. personally held land on the part of the income support recipient).

Example: Joe is a widowed farmer and planning to retire from farming at age 65, in 2003. The farm assets value $250,000 and are in a discretionary trust of which Joe is Appointer, with the trustee being a corporate trustee controlled by Joe. Due to the new legislation Joe, who previously would have been entitled to payments, will very likely be over the Age assets limit when he turns 65. Joe's children have been working on the farm unrewarded for a number of years and Joe, having received advice from Centrelink, understands that he may be able to utilise the forgone wages provisions in transferring the farm to his children (although this will not take place until Joe retires from farming). However, for tax and legal reasons neither Joe nor his children want the farm transferred out of the trust. By transferring control of the discretionary trust and corporate trustee to his children on his retirement, Joe can have the forgone wages of his children offset against the resulting gifting amount that eventuates from this transfer. The title deeds will not be altered to reflect this transfer, however, this does not present any difficulties in terms of utilising the forgone wages provisions provided that control of the trust has been formally transferred to the children.

In addition, some of the work Joe's children have done on the property was prior to 1 January 2002, when certain trust assets were not assessed as assets for social security purposes. The work Joe's children have done on the trust land, even pre-1 January 2002, can be taken into account when assessing the forgone wages to be applied.

Transfers to trust or company entities

The forgone wages provisions may be applied where an income support recipient transfers farm assets held in their own name, to a trust or company controlled solely by the person who has worked unrewarded on the farm. In this case Centrelink will take the position that the transfer has been made to an eligible descendant, and the forgone wages provisions can be applied as if the land were being transferred to the eligible descendant in their own name.

The forgone wage provisions may also apply where an income support recipient transfers trust or company farm assets they control to the trust or company of an eligible descendant. As for transfers of land made directly from a recipient to trusts and companies, transfers from entities controlled by the recipient to entities controlled by the eligible descendant will be allowed for forgone wages purposes.

Policy reference: SS Guide 4.1.7 Deprivation Related to Farm Transfers

Last reviewed: 6 November 2017