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Assessable Assets from Non-discretionary Trusts pre 01/01/2002

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Assessment of assets

The following table describes how the assets from a non-discretionary trust are assessed.

If a person is...

Then they...

a co-beneficiary of the assets of a non-discretionary trust

have an asset. The value of the asset is determined by the share of the trust held by each beneficiary, as set out in the trust deed.

Example: If a person is one of 5 beneficiaries of a trust that has $100,000 in assets and the terms of the trust provide that the beneficiaries have an equal interest, then the value of each beneficiary's interest is $20,000.

the sole beneficiary of the assets of a non-discretionary trust

have the beneficial ownership of the trust's assets which are considered to be theirs, unless the assets are exempt.

Description of asset assessment for different roles within trusts

The following table describes the roles of individuals within the trust and the treatment of their trust related assets. A person may have more than one role and each needs to be considered separately.

Role

Description

Settlor

Is not usually entitled to a share of the trust assets, but deprivation of assets provisions may apply for gifts to the trust.

Contributor

Loans made to the trust are assessable assets, and deprivation of assets may apply for gifts to the trust. Deeming applies to the balances of outstanding loans to the trust.

Beneficiary

Assessment is based on the total asset value divided by the person's share of ownership, as specified in the trust deed.

Trustee

Is not entitled to a share of the trust assets unless they are also a beneficiary, although asset(s) may be registered in their name.

Summary table of assessable assets

The following table summarises the assessment of assets from non-discretionary trusts, for pensions.

Type of Asset

Description

Interest on the trust's assets

Assess using the amount or proportion set out in the trust deed.

Beneficiary account

Assess as a financial asset of the person. The money is put in the account by the trust usually as reinvested trust distributions or interest. These may be called beneficiary loan accounts, current accounts or beneficiary current accounts.

Loan to a trust

Assess as a financial asset of the person. The person has loaned the money to the trust. These may also be called beneficiary loan accounts or loans.

Gifting to a non-discretionary trust by a beneficiary or unit holder

The amount of the deprivation is the difference between the value of the asset(s) gifted and any resulting increase in the value of the person's interest in the trust's assets, less the allowable gifting amount.    

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Deprivation of Income and Assets

Chapter 9.6

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Assets gifted to a trust

Maintain the amount that was disposed of as a deprived asset for 5 years from the date of disposal, less the allowable gifting limit.

Managed investments and shares sold/transferred to the trust

Deprivation provisions may apply if adequate financial consideration is not received.


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:

  • age,
  • infirmity,
  • ill health, or
  • improvidence.

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

According to section 52ZO of the VEA, trustee has the same meaning as in the Income Tax Assessment Act 1997.

 

 

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.