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Reassessment of a Controlled Private Trust or Company
Generally the assets and income of a controlled private trust or controlled private company are assessed on an annual basis from the most recent tax return. However, pensioners who are attributable stakeholders of a controlled private trust or controlled private company may request a reassessment of their circumstances at any time. The reassessment period then becomes the attribution period, which must have reference to the applicable derivation period.
Effect on pension of a request for reassessment involving multiple stakeholders
An entity has three attributable stakeholders, X, Y and Z. All the stakeholders are in receipt of an income support payment. Stakeholder X requests a reassessment that results in a decrease in the amount of attributed income for the entity. The decrease in entity income affects all the stakeholders regardless of who originally requested the reassessment.
Documentation — pensioner requirements
The pensioner must supply appropriate documentation to enable a reassessment. It is their responsibility to keep current financial records of the entities they control. The documentation they may supply can include but is not restricted to:
- year to date financial statements (year to date means current financial year),
- previous years' tax returns, if it will help to establish a trend or assist in quantifying the impact of a change in circumstances,
- estimate of expected earnings for the reassessment period,
- documentary evidence of the event that has occurred that has lead to their reassessment request.
The pensioner is also required to supply current financial records at the end of each reassessment cycle. Where a person has difficulty in providing this information, it is appropriate that they seek assistance from their accountant. It should be noted that possible legal ramifications preclude DVA staff from assisting pensioners in compiling the financial statements.
Estimate of expected earnings
The pensioner must supply an estimate of their expected earnings for the reassessment period.
- this estimate is to be used in the calculation of entitlements, and
- at the end of each cycle the estimate will be reviewed and, if required, a new estimate struck.
An asset means any property, including property outside Australia.
According to section 5H of the VEA income is:
- an amount earned, derived or received by a person for the person's own use or benefit;
- a periodical payment by way of gift or allowance; or
- a periodical benefit by way of gift or allowance.
According to section 52ZZJ of the VEA, a person is an attributable stakeholder if a company or trust is a controlled private company or trust in relation to the individual unless the Commission determines otherwise.
The Commission may, by writing, determine that, if an individual is an attributable stakeholder of a company or trust at a specified time (the start time), then an attribution period is a period beginning at the start time and ending at the earlier of the following times:
- the later time specified in the determination,
- the time when the individual ceases to be an attributable stakeholder of the company or trust.
The attribution period for the purposes of the application of Division 11A applies to both the individual and the company or trust. That attribution period must relate to a specified derivation period of the company or trust.
An attribution period:
- may, but is not required to, overlap (in whole or in part) the derivation period to which it relates,
- does not have to be of the same length as the derivation period to which it relates,
- does not have to be of the same length as other attribution periods.
A derivation period has the meaning given by section 52ZZP of the VEA.
An entity means any of the following:
a business partnership,
a corporation sole,
a body politic.
Financial year, in relation to a company, means:
- a period of 12 months beginning on 1 July, or
- if some other period is the company's tax year that other period.