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Disposal of Assets to a Private Trust or Company on or after 1 January 2002
Disposal of assets to a private trust or private company by an attributable stakeholder
- a person gives an asset (whether fixed or financial) to a private trust or private company on or after 1 January 2002, and
- the person is an attributable stakeholder or as a result of the transfer, is subsequently attributed with a percentage of the assets of the structure,
the asset will not be a deprived asset of the person (subject to the percentage of the assets of the structure attributed to the person).
Example 1 of disposal of assets - attribution percentage of donor is 100% or less than 100%
Bill gifts a holiday home worth $150,000 and financial investments of $30,000 to a private family trust on 5 June 2002. Bill is the appointor and trustee of the trust and is attributed with 100% of the assets and income of the trust. The deprivation rules do not apply to Bill as he is the sole attributable stakeholder and he cannot 'gift to himself'. This would also be the case for members of a couple who were the only attributable stakeholders.
Example 2 of disposal of assets - attribution percentage of donor is 100% or less than 100%
Jenny is attributed with 30% of the assets and income of a family trust. On 10 July 2002, Jenny gives $50,000 to the trust. Jenny's deprivation amount is $25,000 (($50,000-30%)-$10,000 (gifting free area)). She serves a five-year deprivation period from the date of the gift.
Disposal of assets to a private trust or private company by a non-attributable stakeholder
If a person:
- transfers assets (whether fixed or financial) to a controlled company or trust, and
- at the time of the transfer is not attributed with the assets or income of the entity,
the person will be subject to the deprivation provisions of the Act for the amount they have 'gifted' to the entity. If that person is subsequently attributed with the assets and income of a controlled company or trust, whether wholly or partially, the deprivation period and amount are not changed.
Example of asset disposal to a private trust or company by a non-attributable stakeholder
On 10 February 2002, Richard 'gifts' $50,000 to a controlled private trust. He is subject to a 5-year deprivation period for the amount he has gifted. On 3 June 2002, Richard is attributed with 40% of the assets and income of the trust. Richard's deprivation period or amount does not change as he was not an attributable stakeholder (or did not become an attributable stakeholder) of the trust at the time the transfer of assets occurred.
An asset means any property, including property outside Australia.
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.
A deprived asset is an asset:
- that has been disposed of for less than its value (that is, adequate financial consideration has not been received), and
- the value of which is included in the value of the person's assets for the purpose of determining that person's rate of pension.
Most private trusts have a person/s in the position of appointor, who have the power to:
- dismiss and appoint a trustee,
- veto a trustee's decision,
- exercise control over the trustee in another manner, or
- change the trust deed.
Trustee has two meanings depending on the context, (i) and (ii).
(i) a person who looks after someone else's affairs
According to section 202 of the VEA, a trustee is a person appointed by the Commission to administer the financial affairs of a pensioner who may be incapable of managing their own affairs for reasons such as:
- ill health, or
These criteria include circumstances where a pensioner has a psychiatric disorder or a mental illness as a result of alcohol or drug addiction.
A trustee can be appointed, with or without the consent of the pensioner and once appointed, a trustee has full control of the pension payment.
(ii) a person responsible for administration of a trust
- legally married to another person and is not living separately and apart from the other person on a permanent basis; or
- living in a prescribed registered relationship with the other person (whether of the same sex or a different sex) and is not living separately and apart from that other person on a permanent basis; or
- all of the following conditions are met:
- living with another person, whether of the same sex or a different sex;
- not legally married to that person;
- in a de facto relationship with that person; and
- not in a prohibited relationship
The term “partnered” is also commonly used.
An entity means any of the following:
a business partnership,
a corporation sole,
a body politic.