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Disposal of the Assets of a Private Trust or Company on or after 1 January 2002
Disposal of the assets of an entity by an attributable stakeholder on or after 1 January 2002
If an attributable stakeholder disposes of the assets of a private trust or private company on or after 1 January 2002, and they do not receive adequate financial consideration for those assets, the deprivation provisions are to apply, subject to the attribution percentage of the attributable stakeholder.
Example 1 of disposal entity assets by attributable stakeholder/s on or after 1 January 2002
Colin is the sole attributable stakeholder of a private family trust with assets of $300,000. On 2 April 2002 he resigns from the trust. Colin's daughter and son become the new attributable stakeholders. Colin is subject to the deprivation provisions of the VEA for the assets he has 'gifted' to his children ($300,000).
Example 2 of disposal entity assets by attributable stakeholder/s on or after 1 January 2002
Denise and Barbara are attributable stakeholders of a private company. Denise is attributed with 70% and Barbara with 30% of the assets and income of the company. The company's assets are valued at $500,000. Denise and Barbara decide to sell an asset of the company to Denise's daughter. The asset is valued at $100,000, but they sell it for $25,000. Denise and Barbara are subject to deprivation for the difference between the market value and the sale value of the asset ($75,000). Their individual deprivation amounts are subject to their attribution percentages. Denise's deprivation amount is $42,500 ($75,000 x 70% less $10,000 (gifting free area)). Barbara's deprivation amount is $12,500 ($75,000 x 30% less $10,000 (gifting free area)).
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.
An asset means any property, including property outside Australia.
For adequate financial consideration to be received when disposing of an asset, a person must receive value in the form of money or assets. Adequate financial consideration can be accepted when the amounts received reasonably equate to the market value of the asset. It may be necessary to obtain a valuation from a property valuation service provider.
When disposing of income, in order for adequate financial consideration to be received, the person must receive money, goods or services which approximate in value to the rate of disposed income. If a person disposes of an income producing asset and receives adequate financial consideration in money or money's worth for the asset, then it can be accepted that they have received adequate financial consideration for the disposal of both the income and the asset.