Aggregation Assessment of a Controlled Primary Production Private Trust & Company

Aggregation rules

If a pensioner is an attributable stakeholder of a controlled private trust or controlled private company and the main business activity undertaken by the trust or company is primary production, the aggregation rules of section 52CA of the VEA are to apply. That is the value of all the stakeholder's primary production liabilities can be offset against their primary production assets. This includes primary production assets personally owned by the stakeholder. The stakeholder's principal home (and curtilage) is an exempt asset and is not used in the aggregation assessment, even if that home is on the primary production land.    

Example of aggregation of primary production assets

Jim is a 50% attributable stakeholder of a private family trust. His son Slim is also a 50% stakeholder. The trust is part of a primary production enterprise. Jim holds the title to the primary production land in his own name. The trust owns the plant, equipment and stock, and carries the liabilities of the enterprise. Jim's primary production assets and liabilities include the primary production land he personally owns (minus his principal home and curtilage) and his share of the trust primary production assets and liabilities.

Primary production liabilities

A primary production liability is any liability the attributable stakeholder has, that has been obtained for the purpose of running a primary production business. Care should be taken when determining the attributable stakeholder's primary production liabilities as non-primary production assets and liabilities or exempt assets are not considered to be an asset or liability for aggregation purposes. If a liability is held over both a primary production and non-primary production or exempt asset, the liability must be apportioned to determine the primary production liability for the stakeholder.    

Primary production liabilities and the principal home

Where a liability is held over a property that includes the stakeholder's principal home the liability must be apportioned to determine the amount can be used to offset any primary production assets for aggregation purposes. This is because the home and curtilage are not primary production assets for the homeowner. An encumbrance that is held over a primary production asset for a third party also could not be used to offset the value of that asset, as the encumbrance is the liability of the third party.

Example of loan not allowed as a primary production liability

George is a primary producer. He secures a mortgage over a portion of his primary production land. The purpose of the mortgage is to secure a loan for his son who wishes to buy a holiday home. The mortgage cannot be used to offset the primary production assets for aggregation purposes, as the liability is the son's, and the purpose of the loan is not primary production.

Apportionment

If:

• the primary production assets include the principal residence (and curtilage) of the stakeholder, and/or
• a liability is secured over the assets (regardless of whether the primary production assets are entity or personal assets),

then the assets and liabilities must be apportioned to determine the net primary production asset amount for the attributable stakeholder.    

Aggregation and multiple primary production entities

If a person is an attributable stakeholder of multiple entities that have primary production assets and liabilities, then all the primary production assets and liabilities of those entities are brought into account when determining the stakeholder's aggregation assessment (subject to the asset attribution percentage the stakeholder has in the entities). This means that assets and liabilities from one primary production business may be aggregated with other primary production assets and liabilities owned or attributed to the stakeholder.