4.12.4.10 Valuation of the Assets of Designated Private Trusts & Designated Private Companies

Date of effect

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

Summary

This topic provides information on the following:

  • valuing assets (1.1.A.290) of designated private trusts and designated private companies, and
  • the treatment of designated private company shares.

Act reference: SSAct section 1207P Designated private trusts, section 1207N Designated private companies

Attributable assets of designated private trusts & designated private companies

An asset of a designated entity is any asset (excluding exempt assets (1.1.E.170) and excluded assets), whether fixed or financial (1.1.F.130) that the entity owns (wholly or partially). The value of the assets (including shares and managed investments) of a designated entity is determined by the current market value (1.1.M.40) less any allowable liabilities.

An income support recipient's estimate of the value of an asset is accepted only where the delegate considers the estimate is commensurate with the current market value. Where there is doubt about its value, the delegate should take all reasonable steps to ascertain the current market value of the asset.

Example: A valuation by a professionally qualified valuer appointed by Centrelink of real estate owned by the company.

Note: See SS Guide 4.12.3.20 for the treatment of the assets in a fixed unit trust.

Assessing shares in designated private companies

Under the new rules, shares in a designated private company will not be assessed as having any value for social security purposes. This rule also applies to shares held in designated private companies by non-attributable stakeholders.

Explanation: This is to avoid double counting, as the assets of the company are FULLY attributed to the attributable stakeholder/s via the attribution process under SSAct Part 3.18.

Exception: In the case of genuine investors, the income support recipient's shares will need to be valued at the amount paid for them, so this amount can be assessed as an asset of the genuine investor and not attributed to the controller (see (4.12.6.10) for the treatment of genuine investors). This is required, as SSAct Part 3.18 does not make provision for genuine investors to be directly attributed with the assets of the entity.

However the type of company share held by the person MAY have significance when determining whether a person is an attributable stakeholder of the company.

Example: Where the shares are 'voting' or 'non-voting' shares.

Note: See 4.12.6.10 Capital Injections in Return for Equity in a Private Trust or a Private Company for information on the treatment of genuine investors.

Act reference: SSAct section 1208E Attribution of assets, section 1208F When attributed asset is unrealisable, section 1208G Effect of charge or encumbrance on value of assets, section 1208H Effect of unsecured loan on value of assets, section 1208J Value of company's or trust's assets etc., Part 3.18 Means test treatment of private companies and private trusts

Policy reference: SS Guide 4.6.6.10 General Provisions for Valuation of Assets, 4.12.5.10 Recognised & Non-Recognised Liabilities of a Controlled Private Trust or Controlled Private Company, 4.12.1.30 Determining a Controlled Private Company from 01/01/2002

Last reviewed: 11 August 2014