4.12.9.20 Resignations from a Controlled Private Trust or Controlled Private Company Before 01/01/2002
Date of effect
This topic has effect to controlled private trusts and controlled private companies from 1 January 2002.
Summary
This topic provides information on the following:
- resignations from discretionary trusts before 1 January 2002, and
- resignations from fixed trusts or private companies before 1 January 2002.
For a definition of what constitutes a resignation see 4.12.9.10 Resignations from a Controlled Private Trust or Controlled Private Company On or After 01/01/2002.
Resignation from a discretionary trust before 1 January 2002
As discretionary trust assets and income were not assessable until 1 January 2002, the deprivation provisions DID NOT apply if a person resigned from the trust before that date.
Example: Henry and Mary are the appointors and trustees of a discretionary family trust that was set up in 1989. The assets of the trust totalled $700,000, including the family home valued at $170,000. Henry and Mary were in receipt of Age. They realised that from 1 January 2002 they would be attributed with the assets and income of the trust and would no longer be entitled to the pension. On 1 November 2001 they resigned from the trust, keeping a life interest in the family home. Their entitlement to pension was unaffected.
Note: If a person was already serving a 5-year deprivation period arising from having originally gifted assets to the trust, any deprivation amount would continue to be assessed for the balance of the 5-year period. However, if the gifter was deemed to still be the controller, the amount of the disposition was to be reduced by the person's attribution percentage from 1 January 2002.
Resignation from a fixed unit trust or private company before 1 January 2002
If a person resigned from a fixed unit trust or private company before 1 January 2002 and relinquished their units or shares for LESS THAN the value assessed (using the net asset backing method), the deprivation provisions apply.
Example: Rod and Marie (members of a couple) were the majority shareholders in a private company. They held 95 voting shares between them. Their shares were valued at $50,000 (using the net asset backing method). On 20 September 2001, Rod and Marie resigned from the company and sold the shares to their children for $15,000. Rod and Marie were subject to deprivation for the amount of $25,000 ($50,000 − $15,000 − $10,000(free area)).