This section outlines policy concerning the application of the $500,000 assets limit that applies to sugarcane farm [2] assets transferred under RASF. It also covers policy concerning assessment of the value of sugarcane farm assets for the purposes of RASF.
According to subsection 5PAA(1) of the VEA [3], a sugarcane farm is a farm that is used predominantly for the purposes of a sugarcane farm enterprise [2].
All primary production assets and liabilities are aggregated in order to calculate the net value of the sugarcane farm enterprise [2]. This includes the net value of the:
If a sugarcane farmer owned a $700,000 sugarcane farm [2] with a $250,000 mortgage, for the purposes of RASF the value of the farm is $450,000. Liabilities taken out for non-farm purposes (eg holiday home) cannot be deducted from the value of the farm.
More → [5]
VEA → [6]
For RASF purposes, the value of the home and curtilage [2] is excluded from the sugarcane farm value where the sugarcane farmer retains a life interest [2], freehold estate or leasehold interest in their principal home [2] on the sugarcane farm.
More → [7]
In cases where a sugarcane farmer has an interest in a sugarcane farm partnership [2], the total value of the combined sugarcane farm enterprise can not exceed $500,000.
Where a sugarcane farm enterprise valued at $700,000 is owned by two brothers, each with shares of $350,000, the retiring sugarcane farmer cannot take advantage of RASF since the total value of the combined sugarcane farm enterprise exceeds $500,000.
A valuation of the sugarcane farm land and other sugarcane farming assets may be required, for example, if the sugarcane farmer's estimate appeared understated, or where the value of these assets was close to the $500,000 limit.
Where a person's sugarcane farm(s) and relevant sugarcane farm assets [2] are held within a trust, the usual rules regarding assessment of designated private trusts [2] do not apply. It is not the value of the sugarcane farmer's interest in the trust that is to be valued, but rather the value of the sugarcane farm and sugarcane farm assets in which the sugarcane farmer has an eligible interest [2].
More → [8]
According to subsection 5PAA(1) of the VEA [3], a sugarcane farm enterprise is a farm enterprise [2] where:
For the full definition, refer to subsection 5PAA(1).
According to subsection 5PAA(1) of the VEA [3], a sugarcane farm is a farm that is used predominantly for the purposes of a sugarcane farm enterprise [2].
Curtilage is the land adjacent to the exempt principal home [2]. A certain amount of curtilage is disregarded for the assets test. [2]. The amount of curtilage that is exempt depends on whether the private land use test [2] described in section 5LA(3) of the VEA, or the extended land use test [2] described in section 5LA(4) of the VEA, is satisfied. Under the private land use test, up to two hectares on the same title as the principal home may be exempt. Under the extended land use test, all land on the same title as the principal home may be exempt.
A life interest arises when a pensioner:
A life interest remains current until the pensioner:
The principal home has the meaning given by subsection 5LA(1) [3] of the VEA and subsection 5LA(2) [3] of the VEA. The principal home of a person is generally the place in which they reside. In certain circumstances, however, the principal home of a person can be the place in which they formerly resided. The following property is regarded as part of the principal home.
For the purposes of income and assets assessment, a partnership is the relationship which exists between people carrying on business in common, with a view to making a profit. A partnership agreement may be oral OR written. The business may be run:
The business is not a separate legal entity, which means that although the partnership lodges a tax return, the profit or income is assessable in the hands of the individual partners.
Each partner:
According to subsection 5PAA(1) of the VEA [3], relevant sugarcane farm assets in relation to a sugarcane farm [2], means any relevant farm asset or assets [2] that are a produce of, or are used for the purposes of, a sugarcane farm enterprise [2].
According to section 52ZZB of the VEA, a trust is a designated private trust unless:
the following conditions are satisfied, that is the trust:
units [2] are held by 50 or more persons, and
the trust was not created, continued in existence or operated under a scheme that was entered into or carried out for the sole or dominant purpose of enabling any individual/s to avoid Division 11A (means test of private companies and private trusts), section 52ZZB of the VEA or the equivalent section of the Social Security Act, or
VEA [18]
Eligible interest in a sugarcane farm
Subsection 5PAA(5) [3] VEA
Eligible interest in a relevant sugarcane farm asset
Subsection 5PAA(6) [3] VEA
VEA (go back) [19]
A sugarcane farmer holds an eligible interest in a sugarcane farm [2] if they:
Refer to subsection 5PAA(5) for the full definition.
VEA ? [24]
Under RASF, net sugarcane farm [2] assets worth up to $500,000 can be transferred without being assessed under the deprivation provisions [2]. The limit is a total limit for the person and applies to all interests. If a person has an interest in two sugarcane farming enterprises, the first valued at $350,000 and the second at $450,000, the person has total sugarcane farming interests of $800,000 and does not qualify under RASF.
More ? [25]
VEA ? [26]
Sugarcane farm assets valued over $500,000 can be transferred under RASF provided the eligible descendant [2] already has an interest in the sugarcane farm. In these cases, the total value of the sugarcane farm or farms being divested, less the value of the descendant's estate or interest in the sugarcane farm or farms, cannot exceed $500,000.
A retiring sugarcane farmer is involved in a sugarcane farm enterprise [2] valued at $600,000. His son is a partner, holding a one-third share in the property. The value of the sugarcane farm assets being divested is $600,000 less the son's share of $200,000 = $400,000. Therefore the retiring sugarcane farmer is able to access RASF.
Requirement for qualifying sugarcane farmer
Section 49Q(1) [22] VEA
Requirement for former partner
Section 49Q(2) [22] VEA
Value of farm reduced by value of transferee's interest
Section 49R(3) [22] VEA
According to subsection 5PAA(1) of the VEA [3], a sugarcane farm is a farm that is used predominantly for the purposes of a sugarcane farm enterprise [2].
According to subsection 5P(1) [3] of the VEA, an eligible descendant in relation to a person means:
According to subsection 5PAA(1) of the VEA [3], a sugarcane farm enterprise is a farm enterprise [2] where:
For the full definition, refer to subsection 5PAA(1).
Forgone wages are not considered to represent an interest and cannot reduce the value of the transferred assets. However, a transfer completed prior to 29 April 2004 in recognition of forgone wages will be allowed as an interest in the assets. For example, a retiring sugarcane farmer has sugarcane assets worth $700,000. His son has worked on the farm many years and has accrued forgone wages worth $250,000. A share of the farm is transferred on 15 April 2004 representing that amount. For RASF purposes, the farmer's interests are now worth $450,000.
If the transfer was completed on 30 April 2004, the transfer would not be recognised for RASF purposes and the asset value would be taken to be $700,000. The farmer would therefore not qualify for RASF.
VEA ? [32]
A transaction that reduces the value of property between the date of announcement of the RASF scheme (29 April 2004) and the date on which a sugarcane farm [2] property is transferred does not reduce the value of the property for RASF eligibility purposes. That is, the value associated with the transaction is disregarded when assessing the value of the property for RASF eligibility purposes.
If a sugarcane farmer wishing to participate in RASF takes any action relating to the property after the announcement of RASF in order to reduce its value to $500,000 or less, they are disqualified from participating in RASF. The value prior to the reduction (i.e. a value in excess of $500,000) will be applied.
A sugarcane farmer who owned a property worth $600,000 subdivided it in May 2004, after the announcement of RASF. The sugarcane farmer gave a parcel worth $100,000 to his children. If the sugarcane farmer decided to give the remaining $500,000 worth of land to his children, the value of the sugarcane farm would be taken to be $600,000 for RASF eligibility purposes. In other words, the sugarcane farmer's assets remain in excess of the $500,000 limit.
VEA ? [33]
It is not possible to use the forgone wages provisions in addition to RASF.
More ? [34]
According to subsection 5PAA(1) of the VEA [3], a sugarcane farm is a farm that is used predominantly for the purposes of a sugarcane farm enterprise [2].
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16207%23comment-form
[2] https://clik.dva.gov.au/%23
[3] http://clik.dva.gov.au/legislation-library
[4] https://clik.dva.gov.au/user/login?destination=node/16226%23comment-form
[5] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn458
[6] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn459
[7] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn460
[8] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn461
[9] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/102-assets/1022-determining-value-asset/assessing-assets-encumbrances-and-loans
[10] https://clik.dva.gov.au/book/export/html/16207#ref-cspol_part5_ftn458
[11] clik://LEGIS/VEA/section 49R(5)
[12] https://clik.dva.gov.au/book/export/html/16207#ref-cspol_part5_ftn459
[13] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/510-retirement-assistance-sugarcane-farmers-scheme-rasf/5107-valuation-sugarcane-farm-assets/retaining-life-interest
[14] https://clik.dva.gov.au/book/export/html/16207#ref-cspol_part5_ftn460
[15] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/103-business-structures-and-trusts
[16] https://clik.dva.gov.au/book/export/html/16207#ref-cspol_part5_ftn461
[17] clikpopup://DEF/Excluded%20trust
[18] https://clik.dva.gov.au/book/export/html/16207#tgt-glossary_glossary_ftn3
[19] https://clik.dva.gov.au/book/export/html/16207#ref-glossary_glossary_ftn3
[20] https://clik.dva.gov.au/user/login?destination=node/16156%23comment-form
[21] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn462
[22] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-vea
[23] https://clik.dva.gov.au/user/login?destination=node/16229%23comment-form
[24] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn465
[25] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn466
[26] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn467
[27] https://clik.dva.gov.au/book/export/html/16207#ref-cspol_part5_ftn465
[28] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/96-deprivation-income-and-assets
[29] https://clik.dva.gov.au/book/export/html/16207#ref-cspol_part5_ftn466
[30] https://clik.dva.gov.au/book/export/html/16207#ref-cspol_part5_ftn467
[31] https://clik.dva.gov.au/user/login?destination=node/16212%23comment-form
[32] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn468
[33] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn469
[34] https://clik.dva.gov.au/book/export/html/16207#tgt-cspol_part5_ftn470
[35] https://clik.dva.gov.au/book/export/html/16207#ref-cspol_part5_ftn468
[36] https://clik.dva.gov.au/book/export/html/16207#ref-cspol_part5_ftn469
[37] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/96-deprivation-income-and-assets/969-deprivation-related-farm-transfers
[38] https://clik.dva.gov.au/book/export/html/16207#ref-cspol_part5_ftn470