10.3.1 Overview of Business Structures and Trusts
Last amended: 9 October 2006
Business structures
Income and assets are assessed differently for business structures, depending on the nature of the business structure. The three main categories of business structure are:
- sole traders
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Assessing the Income and Assets of Sole Traders and Partnerships
- partnerships
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Assessing the Income and Assets of Sole Traders and Partnerships
- private companies
- private trusts
Current private trusts and companies rules
The contents of section 6 to section 18 relate to specific rules that apply to the assessment of income and assets of private trusts and private companies form 1 January 2002. Business structures such as partnerships and sole traders are subject to their own rules and are dealt with separately.
26 June 1992 changes to assessment for primary production
On 26 June 1992, a change was introduced to allow primary producers to offset the value of all their primary production liabilities against primary production assets. All assets in primary production and all liabilities relating to primary production are now aggregated, as if they were one asset and one liability. The reason for the change is that many primary producers have individual farm assets with a current market value less than the level of the debt secured against them, because the debt has not reduced as quickly as the asset has depreciated. Before 26 June 1992, the asset value for those assets was maintained as nil, and the excess debt could not be offset against positive values assessed for other farm assets.
Summary of private trusts and companies
For the assets and income of a private trust or private company to be attributed to an individual the trust or company must be:
- a designated private trust or designated private company, and
- a controlled private trust or controlled private company in relation to the individual, and
- the individual must be an attributable stakeholder of the trust or company.
Pre 1 January 2002 trust and company rules
Whilst the new rules take effect from 1 January 2002, they do not replace the trust and company rules that applied prior to that date. The pre 1 January 2002 rules should be applied when calculating any assessable income or assets of a private trust or private company prior to 1 January 2002. This includes deprivation of an interest in a private trust or private company prior to 1 January 2002.
Private trusts & private companies post 01/01/2002
Section 6 to section 17 deal with the treatment of private trusts and private companies from 1 January 2002 and contain information on:
- how to determine a designated private trust or private company and how to determine a controlled private trust or private company,
- the use of control and source tests and the associates rule when attributing the assets and income of a private trust or private company to an individual,
- the attribution to individuals of the assets and income of private trusts and private companies,
- associated issues concerning deprivation of income and assets, the treatment of income from different sources and the treatment of various types of assets, and
- the treatment of primary production assets that are held in private trusts and private companies and information on concessional primary production trusts.
Special Disability Trusts
Sections 18 and 19 relate to the rules applicable to special disability trusts (SDT). On 13 October 2005 the Prime Minister announced a package to assist families wishing to make private financial provisions for the current or future accommodation and care of a son or d — aughter with severe disability by contributing assets into a trust account. The package includes means test concessions for service pension and income support recipients who have reached pension age. These concessions apply where a trust has been established solely for the care and accommodation needs of a person with a severe disability.
Source URL: https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/103-business-structures-and-trusts/1031-overview-business-structures-and-trusts