B51/1994 TRUST AND PRIVATE COMPANY ASSESSMENT PROCEDURES

DATE OF ISSUE: 2 NOVEMBER 1994

TRUST AND PRIVATE COMPANY ASSESSMENT PROCEDURES

PURPOSE

The purpose of this Departmental Instruction is to advise of the enhanced procedures concerning: the setting of attributes when processing trust and private company cases; the assessment of goodwill; and, a range of check sheets and calculation forms introduced to assist in processing these cases.

INTRODUCTION OF NEW ATTRIBUTE

Background

2.The trust review team (TRT) concluded its review of trusts and private companies in September 1994. During the review a special attribute was added to the Claims Management System (CMS).

3.The new attribute was instituted so that greater monitoring of trust or private companies cases could be undertaken. Once attributes have been recorded against these cases ongoing re-assessment will be incorporated into the Department's review strategies.

Claims Management Update Attribute Facilitiy (CM.UA)

4.To ensure that cases with a trust or private company are updated with the attribute, the CM.UA screen should be updated when actioning both pensioner and departmentally initiated reviews. Update is actioned by placing a "Y" next to the attribute "Trust Review".

GOODWILL

Background

5.During the Trust Review, Branch Office representatives advised that the assessment of goodwill as an asset presented difficulties for both examiners and pensioners as it was often of an inderterminant value except at a time of realisation or acquisition.

6.Goodwill is quite often included in a company or partnership Balance Sheet as an "Intangible Asset". The true value of the goodwill stands at date of exchange only as it may be increased or decreased according to the new proprietor. Goodwill may include among a number of things, an established brand name or location.

7.Occasionally a goodwill component is included as an ongoing entry as an asset of a partnership, business or private company. In such a case it is reasonable to include the declared value as an amount in the total assets for the purpose of working out the value of the business entity.

8.If subsequently, the pensioner challenges the amount recorded as goodwill and wishes to have their assessment reviewed, a revised calculation of the value of goodwill given by the pensioner should be accepted, even if this amount is declared as nil. If a goodwill value is not declared in a company, partnership or business return there is no need pursue a value with the pensioner due to its intangible nature.

INTRODUCTION OF ASSESSMENT AIDS

Background

9.The TRT developed a number of profiles and calculation forms to assist with assessing trust, partnership and company cases. These forms were developed as a result of research and analysis carried out by the TRT in consultation with Branch Office staff. Their purpose is to improve file notation on the structure of the trust or private company and assist in the assessment of these cases by limiting the need to research the entire file at each assessment review. Even though the use of the aids is not compulsory, it is recommended as they will assist future Branch Office processing of assessment reviews.

Forms

10.The combined Trust and Private Company Profile (Attachment A) is intended to be used with the New Claims Form and will be incorporated into the New Claims Package. Meanwhile, New Claims examiners may issue this form for completion when a pensioner has an interest in either a trust or private company.

11.The Trust Profile and Private Company Profile (Attachment B)are to be used at each review and should be placed as the uppermost folio of the file. These profiles will give a clear picture of the structure of the trust or private company and indicate how the income and/or assets should be assessed.

12.The Trust Check-list and Private Company Check-list (Attachment C) are to assist examiners with processing to ensure that all documentation has been referred to ensure a correct assessment.

13.The Private Company Calculation (Attachment D) sheet is to be used to assist examiners with the calculation of the value of the shares in the private company and the Assessable Assets Calculation (Attachment E) sheet is to be used to assist with the calculation of the value of a partnership or farm.

BRANCH CONTACTS

14.The following officers attended a training seminar conducted by the Trust Review Team in September 1994:

Queensland Roy Steadman

New South Wales — Chris Pemberton, Gerry Gallagher and Michael Hornery

Victoria — Tim McNamara

Tasmania — Doug McLean

South Australia — Dale Robertson

Western Australia — Tom Krutsky

Given their processing experience and contributions made during the review they are recommended as initial points of contact for any enquiries concerning the review.

16.If you have any further enquires in relation to these matters, please call Nigel Parmenter on (06) 289 6342 or John Fely on (06) 289 6440.

KAY GRIMSLEY

ASSISTANT SECRETARY

INCOME SUPPORT

File Number

Name: ............................................................................ File No:........................

*Name of private company or family trust*	*Shareholder/* *Beneficiary*	No of shares/units each	*Type*eg Class A,B,C etc	*voting* *rights* *Y/N*	*income* *rights* *Y/N*	*asset* *rights* *Y/N*	*Directors/* *Trustee*	*Current loans TO company/* *trust -* (name of lender, balance of loan, interest rate)	*Loans FROM* *company/trust* (name of debtor, balance of debt, interest rate)	*Name(s) of Associated* private co (ies) &/or trusts *

*Note - please provide details for all associated entities,

including non trading corporate trustees

Signature.....................................................................

Date ......./......./.......

File Name:File Number:

TRUST PROFILE

The Trust known as ................................................................................. is structured in the following fashion according to the Trust Deed at folio .....

and the information provided at folio ..... .

Trustee: ........................................

Is Trustee a Private Company Yes/No

Income Discretionary/Non-discretionary

Assets — Discretionary/Non-discretionary

Is the vet/partner the only beneficiary? Yes/No

If trust is discretionary, is there a Contingent

Interest? If trust is a Contingent Interest we

cannot hold assets in vet/sps assessment.Yes/No

Is vet employed by the trust?Yes/No

Is partner employed by the trust?Yes/No

Is there a history of Capital payments

or distributions?Yes/No

Gifts/Loans by Vet/partner to trust:Yes/No

If "Yes" what are the amounts and dates of the gift/loans.

Name	Type	Amount	Date	Deeming/Deprivation	Folio
	Gift/Loan			Yes/No
	Gift/Loan			Yes/No
	Gift/Loan			Yes/No
	Gift/Loan			Yes/No
	Gift/Loan			Yes/No
	Gift/Loan			Yes/No

(NB. Loans made after 21.8.90 will attract "Deeming".)

Is there a loan account from the trust

to the vet/partner?Yes/No

Is this account increasing due to payment by

the trust of private expenses? (If "yes" hold as

income.)Yes/No

Comments:.............................................................................................................................................................................................................................................................................................................................................................................................

..............................................................................

Examiner — Verified by Delegate

Date: / / Next Review due / /

PRIVATE COMPANY PROFILE

The Private Company known as ................................................................................. is structured in the following fashion according to the Memorandum and Articles of Association at folio ....... and information provided at folio ....... .

Director/s:.............................................................................................................................................Details of Shares

Number Issued	Type (A,B etc)	Voting Rights	Income Rights	Asset Rights	Par Value	Folio
		Yes/No	Yes/No	Yes/No	Yes/No
		Yes/No	Yes/No	Yes/No	Yes/No
		Yes/No	Yes/No	Yes/No	Yes/No
		Yes/No	Yes/No	Yes/No	Yes/No

Details of Shares held by Pensioners

	Type	Number		Type	Number
Veteran			Partner
Veteran			Partner

Is vet employed by the company?Yes/No — Folio ........

Is partner employed by the company?Yes/No — Folio ........

Is there a history of Capital payments

or distributions?Yes/No — Folio ........

Gifts/Loans by Vet/partner to the company:Yes/No — Folio ........

If "Yes" what are the amounts and dates of the gift/loans.

NameTypeAmountDateDeeming/DeprivationFolio

	Gift/Loan			Yes/No
	Gift/Loan			Yes/No
	Gift/Loan			Yes/No
	Gift/Loan			Yes/No

(NB. Loans made after 21.8.90 will attract "Deeming".)

Is there a loan account from the company

to the vet/partner?Yes/No — Folio.......

Is this account increasing due to payment by

the company of private expenses?Yes/No — Folio.......

Do the pensioner/s have the benefit of using company

assets or does the company pay private expenses?Yes/No — Folio.......

(If "yes" further investigation is required.)

Is the pensioner/s principal residence owned by the company?Yes/No — Folio.......

Is there "Security of Tenure"?Yes/No — Folio.......

Is there a Super Fund for the pensioner/s — Yes/No — Folio.......

(If "yes" please note details in comments field.)

Are there any subsidiary or associated companies

or trusts? (If "yes" fill in a separate Profile for each.)Yes/No — Folio.......

Does the company own real estate?Yes/No — Folio.......

(If "yes", AVO valuation required. If already obtained see folio ........)

Comments:

...................................................................................

....................................................................................

.....................................

Examiner Verified by Delegate

Date: / / Next Review due / /

Family Trust Check List

Client's Name ...............................................................................

File Number ..............

Documentation Required for each Trust

Trust Name.....................................................

Required

Folio (s)

❏Trust Deeds — Y — N

...........

❏Income Tax Return (each year being reviewed)Y — N

...........

❏Balance Sheet — Y — N

...........

❏Profit and Loss Account — Y — N

...........

❏Depreciation Schedule — Y — N

...........

❏Beneficiaries' Loan Account — Y — N

...........

❏Distribution Statements — Y — N

...........

❏Personal Income Tax Return — Y — N

...........

*Note if the trustee is a private company then documentation will be required as per private companies check-list

If Real Estate held by trust

Required

Folio (s)

❏Rural Property Questionnaire — Y — N

............

❏Council Rate Notice — Y — N

............

❏AVO valuation on file — Y — N

............

❏AVO valuation requested — Y — N

............

Comments ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

________________________________________________________________________________

Signature _________________________________________________________________Date____/____/____

Private Company Check List

Client's Name .........................................................File Number .................

Documentation Required for each Company

Company Name..................................................................................

Required — Folio (s)

❏ Memorandum and Articles of Association — Y — N

...........

❏ Company Income Tax Return (all years being reviewed)Y — N

...........

❏ Directors' Report — Y — N

...........

❏ Balance Sheet — Y — N

...........

❏ Profit and Loss Account — Y — N

...........

❏ Depreciation Schedule — Y — N

...........

❏ Shareholders' Loan Accounts — Y — N

...........

❏ Schedule of current shareholders — Y — N

...........

(Including number of shares issued, number of shares held and their rights)

❏ Statement of Sources and application of funds document — Y — N

...........

❏ Personal Income Tax Return — Y — N

...........

If Real Estate held by company

Required — Folio (s)

❏Rural Property Questionnaire — Y — N

...............

❏Council Rate Notice — Y — N

...............

❏AVO valuation on file — Y — N

...............

❏AVO valuation requested — Y — N

...............

Comments

______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Signature _________________________________________________________Date____/____/____

File Number:

Name ............................................................................................................

Name of Company ......................................................................................

(If more than one company, use a separate sheet.)

Using the "Net Asset Backing Method" to calculate the value of a private company share, the following information is required from the latest Income Tax Return and AVO valuation.

(A)Total Assets$____________(Folio.....)

(B)Total Liabilities (including Par

Value shares)$____________(Folio.....)

(C)Number of shares issued with

rights to capital upon wind-up

as per the Memorandum and

Articles of Association _____________(Folio.....)

(D)Number of shares held by

veteran and/or partner with

rights to capital upon wind-up — _____________(Folio.....)

(E)Dividend and/or income paid — _____________(Folio.....)

(F)Number of shares entitled to

receive dividends — _____________(Folio.....)

(G)Number of shares held by

veteran and/or partner entitled

to receive dividends — _____________(Folio.....)

Calculation

Total Assets:$

Less Liabilities:$____________

Net Assets

Divided by the number of shares with

rights to capital upon wind-up — _____________

Equals(H)$per share

NB. You must use the actual value for assets not book value. If company owns property, valuations must be obtained. If Written Down values for plant and machinery appear low, ask for "Market Values".

For assessment purposes we insert the value and number of shares held on the "Other Shares" screen. ie.

(D) x (H)= Asset value

Income is calculated by dividing the dividend paid by the number of shares entitled to participate in the receipt of any dividend.

(E)__________ x (G) .................=.............................divided by 26

(F)

= income per fortnight

....................................... Examiner

/ /

Name: ................................................................................................................................File No:

Property Address: ..........................................................................................................

% Ownership:Veteran: %; Partner: %

If Primary Production is the major portion of the venture then figures at "B" to "I" may be shown as a negative value.

Part 1

Total value of property:(A)$(Folio .....)

Less Value of Home & Curtilage:

(If Principal place of residence)$___________

Value of Pensioner/s assessable asset =(B)$

Go to Part 2 if property is mortgaged. (This does not apply if Primary Production is the major portion of the venture.)

Part 2 (Apportionment of Mortgage)

Total Amount of Mortgage(C)$(Folio .....)

Net Value of Assessable Asset(B) - { (B) x (C) }

(A)

$ ________ - { ________ X ________ }

= Net Value of Assessable Asset.(D)$

Go to Part 3 if property not wholly owned by vet and/or partner

Part 3

(B) or (D) (Whichever is applicable )

X % Ownership divided by 100$_________x_______

100

Net Value of Assessable Asset (Property)=(E)$

Go to Part 4 if Plant and machinery and/or livestock are included in assessment

Part 4

a) Plant and Machinery$

Less liabilities$_____________

= Net Asset value(F)$

b) Stock/Livestock$

Less liabilities$_____________

= Net Asset value(G)$

Go to Part 5 If Plant and Machinery and/or livestock are not wholly owned by vet and/or partner

Part 5 - (Apportionment of Plant and Machinery and Livestock)

a) (F) x % Ownership divided by 100$ ___________ x ___________

100

= Net value of Plant and Machinery(H)$

b) (G) x % Ownership divided by 100$ ___________x ___________

100

= Net value of Stock/Livestock(I)$

Net Value of Assessable Asset at (B), (D) or (E) as above$+/-

Plus Net Asset value of Plant and Machinery at (F) or (H)$+/-

Plus Net Asset value of Stock/Livestock at (G) or (I)$___________+/-

TOTAL VALUE OF PROPERTY$

Comments: ......................................................................................................................................................................

..........................................................................................................................................................................................

...................................................Examiner

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