4.7.4.20 Primary Production Aggregation Assessment for Sole Traders & Partnerships

Summary

This topic provides information on aggregation assessment for primary producers who are:

Policy reference: SS Guide 4.7.4.30 Primary Production Aggregation Assessment for Companies & Trusts

When the aggregation rules apply

When the main business activity undertaken by a company (1.1.C.220) is primary production (1.1.P.389) activities, the 'aggregation rules' of section 1121A of the Act apply. These rules over-ride the general provision of section 1121 of the Act, concerning deduction of liabilities secured against assets.

Act reference: SSAct section 1121 Effect of charge or encumbrance on value of assets, section 1121A Effect of certain liabilities on value of assets used in primary production

Sole traders

If a farm is run by a sole trader, the aggregation assessment involves:

  • adding all the sole trader's primary production assets (see explanation 1),
  • adding all the sole trader's primary production liabilities (1.1.P.390) (see explanation 2), and
  • deducting the value of the total primary production liabilities from the value of the total primary production assets to give the sole trader's NET primary production assets.

Explanation 1: This excludes the income support recipient's principal home and exempt adjacent land (1.1.A.58).

Explanation 2: This excludes liabilities relating to non-primary production assets such as the principal home and exempt adjacent land.

Example:

Item Value
Whole property ('mixed asset') $450,000
Home and exempt adjacent land $150,000
Primary production asset $300,000

($450,000 − $150,000)

Liability related to the whole farm property $240,000

The proportion of the liability that is a primary production liability is: [the liability on the whole property × (the value of the mixed asset - value of home and exempt adjacent land )] divide by the value of the mixed asset. OR [240,000 × (450,000 − 150,000)] divide by 450,000 = $160,000.

If there are no other primary production assets or liabilities related to them, the net primary production asset is $300,000 minus $160,000, or $140,000 which would be maintained as the net primary production asset.

Act reference: SSAct section 11A(1) Principal home

Partnerships

A partner's share of the partnership assets or liabilities is determined by the balance of their capital accounts (1.1.C.04), as described in the following table.

If the income support recipient's capital account has a… Then that value is an assessable primary production…
positive value, asset.
negative value, or deficit, liability.

Partnership liability

If a partnership liability is secured against mixed assets privately owned by the income support recipient, and which are encumbered, the value of the liability that relates to the non-primary production part of that asset is NOT included in the aggregation assessment.

Example: An encumbered mixed asset may be mortgaged.

The partnership balance sheet is adjusted to arrive at a capital account figure for aggregation assessment.

Adjustment of the partnership balance sheet

The table below describes the action required to adjust the partnership balance sheet for aggregation purposes.

Step Action
1

Calculate the primary production portion of the liability related to the mixed asset, as follows:

[total liability related to the mixed asset × (value of mixed asset - value of principal home and exempt adjacent land)] divide by value of mixed asset.

2

Adjust the partnership balance sheet.

Result: You have determined the new net primary production asset or liability from the partnership.

3 Aggregate the new balance in the income support recipient's partnership capital account with any other primary production assets or liabilities they have.
Last reviewed: 11 August 2014