220.127.116.11 Overseas Real Estate, Partner's Share of a Business & Assets Not Readily Accessible
This topic discusses valuing:
- overseas real estate,
- a partner's share in a business, and
- assets (1.1.A.290) unable to be accessed.
Overseas real estate
Accept a person's estimate of the market value (1.1.M.40) of overseas real estate UNLESS:
- the person is paid under the assets test, OR
- the total value of the person's assets falls within $20,000 of the asset impact level, OR
- the delegate is of the opinion that the person is purposefully underestimating the value of the real estate AND that a more realistic value could affect payment.
The above guidelines ALSO apply if the person resides overseas and payment is administered by the International Operations Branch.
Partner's share of a business
To determine a partner's share of a business, obtain a current market value of the partnership's (1.1.P.95) assets. If the asset value is different to the recorded net asset value the surplus (or deficit) is apportioned to each partner. Unless otherwise specified in the partnership agreement, this is allocated to each partner in the proportions in which they share profits and losses.
Note: A professionally qualified valuer appointed by Centrelink would normally be required to value a partnership's assets where they included real estate.
Example: A partnership of 3 people A, B and C share profits and losses in the proportions 3:2:1. Each has the following balances in their capital accounts:
- Partner A: $17,543
- Partner B: $24,356
- Partner C: $4,179 overdraw
The net value of the partnership assets, in this example, is calculated as follows:
- ($17,543 + $24,356) − $ 4,179 = $37,720
Therefore the recorded net asset value of the partnership is $37,720.
The professionally qualified valuer's valuation of the partnership assets is $70,000.
Therefore there is an excess of actual value of $32,280 over recorded value calculated as follows:
- $70,000 − $37,720 = $32,280.
Unless the partnership agreement specifies otherwise, this excess is distributed to the partners 3:2:1 (the profit sharing ratio):
- Partner A's share is ($32,280 ÷ 6) × 3 = $16,140
- Partner B's share is ($32,280 ÷ 6) × 2 = $10,760
- Partner C's share is ($32,280 ÷ 6) × 1 = $5,380
Consequently each partner's share of the business is:
- Partner A: ($17,543 + $16,140) = $33,683
- Partner B: ($24,356 + $10,760) = $35,116
- Partner C: ($5,380 − $4,179) = $1,201
Note: Partner C's share is reduced by the amount his or her capital account is overdrawn.
Value of assets not readily accessible
IF an asset is not readily accessible the value of the asset CAN be assessed as being less than the face value.
Exception: IF financial hardship is involved, hardship provisions MAY apply.
Example: A person may have severely limited or no access to assets when:
- the asset/s CANNOT be transferred from an overseas country,
- the asset/s are with a bank or company being liquidated, or
- a non-active partner CANNOT access partnership assets following a marriage breakdown.