4.12.4.30 Determining Homeowners & Non-Homeowners where the Home is Owned by a Private Company or Private Trust
Date of effect
This topic has effect to controlled private trusts and controlled private companies from 1 January 2002.
This topic contains the following information:
- principal home owned by a controlled private company or controlled private trust,
- individual has an interest in a controlled private company or controlled private trust,
- reasonable security of tenure,
- treatment of homeowners who are attributable and non-attributable stakeholders, and
- shared equity housing.
Act reference: SSAct section 11A(1) Principal home, section 11A(10) Reasonable security of tenure, section 1207Q Controlled private companies, section 1207V Controlled private trusts
Principal home owned by a controlled private company or controlled private trust
If an individual lives in a home that is owned by a private company or private trust in which they have an interest, the home is assessed as the individual's principal home IF they have reasonable security of tenure.
Explanation: An individual is a homeowner if they have a right or interest in the place they occupy as their home, and the right or interest gives them reasonable security of tenure.
Act reference: SSAct section 11(4) Homeowner
Individual has an interest in a controlled private company or controlled private trust
Situations where an individual is considered to have an interest in a controlled private company or controlled private trust include where they are an:
- attributable stakeholder (see example 1), or
- non-attributable stakeholder (see example 2).
Example 1: Director of a private company, appointor or trustee of a private trust.
Example 2: Minority shareholder of a private company or beneficiary of a private trust.
Act reference: SSAct section 1207X Attributable stakeholder, asset attribution percentage and income attribution percentage
Reasonable security of tenure
If a formal or written agreement between a company or trust and an individual gives the individual the right of occupancy at will or a long term lease then:
- the individual is a homeowner, AND
- the home is assessed as the individual's principal home.
When assessing whether or not an individual is a homeowner consider:
- the terms of the trust deed, articles of association and any other relevant documentation that shows:
- the basis on which the home is occupied, and
- any restrictions on the use or disposal of the property,
- the relationship (e.g. personal, business) of the individual to the director/s or trustee/s,
- whether the individual is a company shareholder or trust beneficiary,
- the length of time the individual has occupied the home and the length of time they expect to stay,
- whether the individual previously owned or partly owned the home,
- the extent to which the individual can influence the director/s or trustee/s to secure uninterrupted occupancy of the home.
Example: An individual has reasonable security of tenure if they:
- are a trustee and/or beneficiary of the trust, AND
- live in the home, AND
- there is no threat of terminating the occupancy.
Therefore the individual is a homeowner and the home is assessed as their principal home.
Home ownership & sole attributable stakeholders
If the principal home of a sole attributable stakeholder or members of a couple (1.1.M.120), whether of the same sex or a different sex, who are the only attributable stakeholders is part of the entity assets which they control then the value of their home (and adjacent land (1.1.A.58)) is an exempt asset (1.1.E.170). (Provided the individuals can demonstrate that they have reasonable security of tenure in the home).
Example: Vince and Fran, members of a partnered couple, are the only attributable stakeholders of a private family trust. The assets of the trust are the family farm worth $600,000, including their principal home and adjacent land, which is valued at $100,000. Vince and Fran's net asset attribution amount is $500,000 or $250,000 each (total assets LESS the value of the principal home and adjacent land).
Home ownership & multiple attributable stakeholders
If the entity assets include the principal homes of multiple attributable stakeholders then the value of the principal home (and adjacent land) of EACH stakeholder is an exempt asset for THAT STAKEHOLDER ONLY. (Provided the individuals can demonstrate that they have reasonable security of tenure in the home). The formula for calculating the asset attribution amount of an individual (where there are no liabilities against the home) is as follows:
- (total entity assets LESS the value of principal home) × attribution percentage
Example 1: Chris and Sue (members of a partnered couple) and Debbie are the attributable stakeholders of a private company. They are attributed with one third each of the assets and income of the company. The assets of the company total $600,000 and include the principal home of Chris and Sue that is valued at $100,000. The home is an exempt asset for Chris and Sue only. Chris, Sue and Debbie's asset attribution amounts are as follows:
| Chris & Sue | Debbie | |
|---|---|---|
| Entity | $600,000 | $600,000 |
| Less value of home | $100,000 | Nil |
| Total | $500,000 | $600,000 |
| Attribution % | 33.33% each | 33.33% |
| Net asset attribution amount |
$166,666 each ($500,000 × 33.33%) |
$200,000 ($600,000 × 33.33%) |
In the above example it may be that 100% of the assets and income of the entity are attributed to Chris and Sue as, in reality, they may control the entity by acting in unison and overriding any decisions Debbie makes. Conversely, Sue and Debbie may act in unison and attribution of the assets and income may be made to them. Each case must be examined carefully to ascertain the level of control exhibited by potential attributable stakeholders.
Example 2: Three siblings, Matt, Tim and Edward are attributable stakeholders of an entity, the assets of which are a farm valued at $1,000,000. Matt is attributed with 60%, Tim with 20% and Edward with 20% of the assets and income of the entity. The principal home of each of the siblings is situated on the farm and is part of the entity assets. Matt's home is valued at $120,000, Tim's home is valued at $90,000 and Edward's home is valued at $60,000. The asset attribution amount for each sibling is as follows:
| Matt | Tim | Edward | |
|---|---|---|---|
| Entity value | $1,000,000 | $1,000,000 | $1,000,000 |
| Less value of home | $120,000 | $90,000 | $60,000 |
| Total | $880,000 | $910,000 | $940,000 |
| Attribution % | 60% | 20% | 20% |
| Net asset attribution amount |
$528,000 ($880,000 × 60%) |
$182,000 ($910,000 × 20%) |
$188,000 ($940,000 × 20%) |
As in the previous example the percentage attributed to the siblings may differ depending on the circumstances of the case. It could be that Tim and Edward act in unison and the attribution of the assets and income would be made to them. Again, each case must be examined carefully before decisions regarding control and attribution are made.
Note: The value of any liabilities (4.12.5.10) secured against the assets and any associated allowable income deductions (4.12.7.20) for interest payable are reduced in line with the exemption given for the principle residence. For information on the method for calculating asset attribution amounts for attributable stakeholders where loans or encumbrances are held against the assets of the entity see 4.12.5.20 Apportioning a Liability of a Controlled Private Company or Controlled Private Trust.
Act reference: SSAct section 1207X Attributable stakeholder, asset attribution percentage and income attribution percentage, section 1208E Attribution of assets, section 1118(1) Certain assets to be disregarded in calculating the value of a person's assets
Policy reference: SS Guide 4.12.1 Attribution Guidelines for Private Trusts & Private Companies from 01/01/2002, 4.12.2 Attributable Stakeholders & Attribution Percentages, 4.6.2 Assets that are exempt from assessment
Shared equity housing
Some organisations provide accommodation through a company structure, for particular groups such as the elderly or people with a disability, on a shared equity basis. The home ownership status of individuals living in shared equity housing (1.1.S.137) is assessed using the provisions for special residences.