18.104.22.168 Determining Severe Financial Hardship - Drawings From an Unincorporated Business
The severe financial hardship test INCLUDES a person's drawings from an unincorporated business. A person MAY be in severe financial hardship (1.1.S.120) if the business becomes unable to make payments.
Explanation: An unincorporated business is generally a partnership (1.1.P.95) OR pastoral company.
If a person claims that an unincorporated business is unable to sustain their drawings they MUST provide:
- a full personal income tax return, AND
- a full business income tax return.
A person is NOT in severe financial hardship IF these returns show that the business can sustain the drawings.
Exception: A person MAY be in severe financial hardship IF substantial evidence shows that significant drawings are no longer sustainable AND the liquid assets (1.1.L.50) of the business are NOT significant.
Examples: Substantial evidence MAY include:
- a significant industry downturn, OR
- an environmental disaster such as bushfire, flood and drought, OR
- a significant change in business operations.
If a person's unincorporated business drawings exceed his or her share of business profits (if any), the person would generally not be considered to be suffering severe financial hardship if those drawings together with income from sources other than the business (including any pension payable under the normal application of the assets test) EXCEEDS the maximum pension or benefit payment.
Act reference: SSAct section 1129 Access to financial hardship rules-pensions, section 1130B Access to financial hardship rules-pension PP (single), section 1131 Access to financial hardship rules-benefits
Policy reference: SS Guide 4.7 Business Structures, Primary Production & pre-01/01/2002 Assessment of Trusts & Private Companies