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Primary Production Aggregation Assessment for Companies & Trusts
Primary production aggregation assessment for private companies
If a person has an interest in a primary production activity that is an assessable asset, the aggregation rules of the VEA must be applied to provide the most favourable result for the person.
This means that if the person has an interest in one or more business structures that are involved in primary production, not only the assets but also the related liabilities need to be brought into account, even if this means an artificial approach to picking up the related liabilities.
The application of the aggregation principles to private companies is at odds with the normal treatment of shares held in non-primary production companies. Generally shares in private companies with excess liabilities are taken to have a nil value. This is because a shareholder's liability for the debts of the company is limited to the nominal value of their shares - unless they make a personal guarantee for the debts. The primary producers' aggregation rules are intended to give favourable assets test treatment to farmers.
Exception: Gifts and loans by a person to a company are not primary production assets.
Primary production aggregation assessment for trusts
If a trust's main business activity is primary production and the person is a beneficiary of the trust, their interest in the assets and liabilities of the trust are their primary production assets and liabilities.
The application of the aggregation principles to trust assets and liabilities is at odds with the normal treatment of interests in non-primary production trusts. The primary producers' aggregation rules are intended to give favourable assets test treatment to farmers.
Exception: Gifts and loans by a person to a trust are not primary production assets.
Example: A trust has net liabilities of $50,000 and the person is a beneficiary of the trust. As there is a net deficiency in the trust, the $50,000 is classed as a primary production liability that can be offset against the person's primary production assets.
Company has the same meaning as in the Income Tax Assessment Act 1997.