Non-Recognised Liabilities of a Controlled Private Company or Trust

Liabilities - loan or debt

Liabilities can include loans that have been made to a trust or company or debts owed by a trust or company. Loans can be from controllers, associates or a third party. Loans can also have been made by another trust or company or debts can be owed by the entity to another trust or company. Liabilities on the balance sheet can generally be deducted from the value of assets to determine the assessable value of a trust or company subject to the exceptions in this section.    

Non-recognised loan and debt

Circumstances where a loan to or debts owed by an entity will not be recognised as a liability of that entity are:

• where no written agreement exists which is signed by all parties to the agreement and witnessed by a third party (associates are not considered to be third parties), and
• loans from, or debts owed to, a person who is under 18 years of age.

Loan requirements

Loans must fulfil the following requirements:

• the loan must be in the name of the trust or company,
• an actual lending of money or an asset of particular value to a trust or company must have occurred, and
• there must be a clear intention by the trust or company to repay.

Treatment of a non-recognised loan and debt

A loan that is not recognised as a liability of an entity will still be considered to be a personal financial asset of the person making the loan and is subject to the deeming provisions.