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Deemed Income from Other Managed Investments
Overseas managed investments
Deeming applies to managed investments held overseas.
Non-exempt funeral bonds
Deeming applies to funeral bonds that are not exempt assets.
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Deeming applied to private unit trusts
The following table describes the application of deeming to private unit trusts:
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If the private unit trust is... | then it is... |
a managed investment | subject to deeming. |
not a managed investment, because it does not meet all of the criteria for a managed investment. For example, if an investor in a private unit trust exercises control over the management of the invested assets then it is not a managed investment. |
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Deeming applied to ostrich and emu farming investments
The following table describes the application of deeming to ostrich and emu farming investments.
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Investment Type | Application of Deeming |
Speculative | Investments of this type are not financial investments and therefore, not subject to deeming. For assessment purposes:
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Share farming scheme | Share farming investments are considered to be businesses, therefore assessment is made of gross income from the business, less allowable deductions. An arrangement is subject to deeming if it is established that the:
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Managed investment scheme | These schemes are managed investments and are subject to deeming. |
Deeming applied to afforestation projects
The following table describes the application of deeming to afforestation projects:
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If the investor is... | Then... |
Carrying on a business alone or with other participants, with a direct investment in an identifiable area of land and associated commodities | assessment is made of gross income from the business, less allowable deductions. |
Not carrying on a business | the arrangement must be examined to establish whether it is a managed investment. NOTE: While forestry investments may be marketed as being managed investments, and may be assessed as managed investments for taxation purposes by the ATO, they have been found in the past to not satisfy the VEA requirements. Careful examination of the prospectus is required because if the investment remains in the name of the individual investor, with the investor being able to exercise a degree of effective control over the management of the invested asset, the investment is not considered a managed investment. Managed investments are subject to deeming. |
Lifetime Income Streams
Asset-tested lifetime income streams purchased on or after 1 July 2019 which were purchased with non-superannuation monies, are considered managed investments and deemed before the assessment day (prior to payments commencing or the owner reaching pension age). After the assessment day, they are no longer considered managed investments and other rules apply, see 10.5.4 Means Test Assessment of Lifetime Income Streams and Glossary term 'Assessment Day'.
What constitutes the different types of ostrich and emu farming investments
9.5.6/Description - Other Managed Investments
An investment is a managed investment if:
- the money or property invested is paid by the investor directly or indirectly to a body corporate or into a trust fund,
- the assets that represent the money or property invested (the invested assets) are not held in the names of investors,
- the investor does not have effective control over the management of the invested assets, and
- the investor has a legally enforceable right to share in any distribution of income or profits derived from the invested assets.
For a full definition see also:
Sections 5J(1A), 5J(1B) and 5J(1C) of the VEA.
An exempt asset is one that is disregarded when calculating the value of a person's assets under the assets test. Examples of exempt assets include:
- the value of a person's principal home,
- any motor vehicle provided under the Vehicle Assistance Scheme,
- the value of any medal or decoration awarded for valour, other than used as an investment or hobby,
- up to two funeral bonds where the combined amount invested is within the funeral bond threshold,
- a prepaid funeral or cemetery plot
- value of a superannuation fund investment prior to pension age.
For a full legislative definition see section 52 of the VEA.
In 1990 the government introduced legislative changes called “deeming” to simplify the assessment of cash deposits and income from certain investments. These changes were made:
- in response to pensioner concerns about complex income and assets test rules;
- to encourage pensioners to maximise their private income.
Deemed income is the minimum rate that the government expects income support pensioners to earn from investments.
Banks created “pensioner accounts” which paid interest at the deeming rate set by the government.
On 1 July 1996 further changes meant the deeming rate was applied to all financial assets as defined in section 5J(1) of the VEA.
According to section 5H of the VEA income is:
- an amount earned, derived or received by a person for the person's own use or benefit;
- a periodical payment by way of gift or allowance; or
- a periodical benefit by way of gift or allowance.
According to section 5J of the VEA, a financial investment means:
- available money,
- deposit money,
- a managed investment,
- a listed security,
- a loan that has not been repaid in full,
- an unlisted public security,
- gold, silver or platinum bullion,
- an asset tested income stream (short term) ; or
- an asset tested income stream (long term) that is an account‑based pension within the meaning of the Superannuation Industry (Supervision) Regulations 1994; or
- an asset‑tested income stream (long term) that is an annuity (within the meaning of the Superannuation Industry (Supervision) Act 1993) provided under a contract that meets the requirements determined in an instrument under subsection (1G);
but does not include an investment in an FHSA (within the meaning of the First Home Saver Accounts Act 2008) or a designated NDIS amount.