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Assessment of Sugarcane Farm Value
How the value of the sugarcane farm enterprise is assessed
All primary production assets and liabilities are aggregated in order to calculate the net value of the sugarcane farm enterprise. This includes the net value of the:
- house and other buildings
- capital improvement
- produce (sugarcane).
Example assessment of sugarcane farm value
If a sugarcane farmer owned a $700,000 sugarcane farm with a $250,000 mortgage, for the purposes of RASF the value of the farm is $450,000. Liabilities taken out for non-farm purposes (eg holiday home) cannot be deducted from the value of the farm.
Value of home and curtilage may have been excluded
For RASF purposes, the value of the home and curtilage is excluded from the sugarcane farm value where the sugarcane farmer retains a life interest, freehold estate or leasehold interest in their principal home on the sugarcane farm.
Value of sugarcane farm partnerships
In cases where a sugarcane farmer has an interest in a sugarcane farm partnership, the total value of the combined sugarcane farm enterprise can not exceed $500,000.
Example assessment of sugarcane farm value - partnership
Where a sugarcane farm enterprise valued at $700,000 is owned by two brothers, each with shares of $350,000, the retiring sugarcane farmer cannot take advantage of RASF since the total value of the combined sugarcane farm enterprise exceeds $500,000.
A valuation of the sugarcane farm land and other sugarcane farming assets may be required, for example, if the sugarcane farmer's estimate appeared understated, or where the value of these assets was close to the $500,000 limit.
Value of sugarcane farm owned by trust
Where a person's sugarcane farm(s) and relevant sugarcane farm assets are held within a trust, the usual rules regarding assessment of designated private trusts do not apply. It is not the value of the sugarcane farmer's interest in the trust that is to be valued, but rather the value of the sugarcane farm and sugarcane farm assets in which the sugarcane farmer has an eligible interest.
- a majority of the enterprise is undertaken for the purposes of farming commercial quantities of cane sugar, or
- a significant proportion of the enterprise is undertaken for the purposes of growing commercial quantities of cane sugar, and the Commission has determined that there are special reasons why the farm enterprise should be treated as a sugarcane farm enterprise.
For the full definition, refer to subsection 5PAA(1).
Curtilage is the land adjacent to the exempt principal home. A certain amount of curtilage is disregarded for the assets test.. The amount of curtilage that is exempt depends on whether the private land use test described in section 5LA(3) of the VEA, or the extended land use test described in section 5LA(4) of the VEA, is satisfied. Under the private land use test, up to two hectares on the same title as the principal home may be exempt. Under the extended land use test, all land on the same title as the principal home may be exempt.
A life interest arises when a pensioner:
- acquires the right to use assets or the income produced by those assets, or
- transfers a non-exempt asset to another person, but retains an interest in the asset, or
- is created by the will of a deceased individual.
A life interest remains current until the pensioner:
- sells the asset, or
- formally surrenders the asset.
The principal home has the meaning given by subsection 5LA(1) of the VEA and subsection 5LA(2) of the VEA. The principal home of a person is generally the place in which they reside. In certain circumstances, however, the principal home of a person can be the place in which they formerly resided. The following property is regarded as part of the principal home.
- the residence itself (e.g. house, flat, caravan),
- permanent fixtures (e.g. stoves, built-in heaters, dish-washers, light fittings and affixed carpets),
- [glossary:curtilage:DEF/Curtilage] (i.e. two hectares or less of private land around the home where the private land use test has been satisfied, or all land held on the same title as the person's principal home where the extended land use test has been satisfied), or
- any garage, shed, tennis court or swimming pool used primarily for private purposes provided it is on the same title as the principal home.
For the purposes of income and assets assessment, a partnership is the relationship which exists between people carrying on business in common, with a view to making a profit. A partnership agreement may be oral OR written. The business may be run:
- in the owners' name(s), or
- under a registered business name.
The business is not a separate legal entity, which means that although the partnership lodges a tax return, the profit or income is assessable in the hands of the individual partners.
- owns an agreed portion of the business assets,
- receives an agreed portion of the profits, and
- is 'jointly and severally' liable for all business debts.
According to section 52ZZB of the VEA, a trust is a designated private trust unless:
the following conditions are satisfied, that is the trust:
units are held by 50 or more persons, and
the trust was not created, continued in existence or operated under a scheme that was entered into or carried out for the sole or dominant purpose of enabling any individual/s to avoid Division 11A (means test of private companies and private trusts), section 52ZZB of the VEA or the equivalent section of the Social Security Act, or
- the trust is a complying superannuation fund: or
- the trust is an excluded trust.
A sugarcane farmer holds an eligible interest in a sugarcane farm if they:
- have a legal estate or interest in the sugarcane farm, or
- have a transferable legal right or a transferable licence to occupy the farm for a particular purpose of the sugarcane farm enterprise, or
- have an equitable estate or interest in a farm, as mortgagor of the legal estate or interest in the farm; or
- are a shareholder in a private company that owns or holds a pastoral lease over the farm land.
Refer to subsection 5PAA(5) for the full definition.