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B24/1992 VICTORIAN STATE GOVERNMENT BOND OFFER TO DEPOSITORS OF PYRAMID GEELONG AND COUNTRYWIDE BUILDING SOCIETIES

Document

DATE OF ISSUE: 09/06/92

VICTORIAN STATE GOVERNMENT BOND OFFER TO DEPOSITORS OF PYRAMID GEELONG AND COUNTRYWIDE BUILDING SOCIETIES

SUMMARY

1.- Victorian Government Bonds replace the principal value of Farrow               building societies deposits as at 24 June 1990

-Asset value of bonds and retained building society deposits are the               "market" value

-no income assessment for original holders

-income and assets tests apply to non-original holders.

BACKGROUND

2. The Victorian Government, through the issue of their bonds, guaranteed that Farrow group investors who accepted the offer would receive full repayment of their deposits in the Pyramid Geelong and Countrywide building societies as at 24 June 1990. The bonds do not cover interest received by the depositor after 30 June 1989.

3. The bonds are to be redeemed in instalments due each August, with a final payout on 31 August 1995.  In some cases depositors may be paid out earlier.

4. Certificates have been issued to each bondholder showing the amount that will be outstanding as at the 31 August each year, after redemption amounts have been paid.


ASSESSMENT UNDER THE INCOME AND ASSETS TESTS

5. Treatment of the Victorian Government bonds under the department's income and assets tests is:

-an asset value equal to the market value of the bonds will be the basis of assessment.  The market value is the value for which the bonds can be sold to major banks and financial institutions.

-original depositors who accepted the bond offer will only receive their original capital balance, which does not attract any income.  The Minister has exempted these bonds held by original depositors only, from deeming provisions with effect from 17 April 1991.

6. Depositors who retained their original investments with the Farrow group of building societies will have the asset value of their funds set at the market value of the equivalent Victorian Government bond entitlement.  Deeming of income has been exempted on these investments with effect from 1 March 1991.

7. In the case of Victorian Government bonds held by pensioners other than the original owner, the normal income test rules, including deeming, will be applied.

8. The following is a summary of the effect of the Victorian Government Bond issue on service pensions:

Income testAssets test Investment Realisation Value

Original building societyExempted from "Market""Market"

deposits (bond offer not deeming with value equalvalue or

taken up) effect 1/3/91to bondspayout from

liquidation

proceeds

Original bondholders (offer Exempted from "Market" Partial

taken up by original bldg.deeming withvalueredemption

society depositors) effect 17/4/91 31 August

each year

comm. 1991

final.1995

Non-original bondholdersIncome to be"Market"The same as

(purchased from originalat deemed ratevalueoriginal

bondholders) bondholders

PETER HAWKER

NATIONAL PROGRAM DIRECTOR (BENEFITS)