Last updated 5 January 2007
VEA ? [2]
When the main business activity undertaken by a company [3] is primary production activities, the aggregation rules of section 52CA [4] of the VEA apply. These rules over-ride the general provision of section 52C, concerning deduction of liabilities secured against assets.
If a sole trader [3] runs a farm, the aggregation assessment involves:
The table below provides an example of the calculation of the aggregation assessment when a sole trader runs a farm.
Item |
Value |
Whole property ('mixed asset') |
$450,000 |
Home & curtilage |
$150,000 |
Primary production asset |
$300,000 ($450,000 - $150,000) |
Liability related to the whole farm property |
$240,000 |
The proportion of the liability that is a primary production liability is:
[the liability on the whole property x (the value of the mixed asset - value of home & curtilage )] divided by the value of the mixed asset,
ie [240,000 x (450,000 - 150,000)] divided by 450,000 = $160,000.
Note : If there are no other primary production assets or liabilities related to them, the net primary production asset is $300,000 minus $160,000, ie $140,000, which would be maintained as the net primary production asset.
A partner's share of the partnership assets or liabilities is determined by the balance of their capital accounts [3], as described in the following table.
If the person's capital account has a... |
Then that value is an assessable primary production... |
positive value, |
Asset. |
negative value, or deficit, |
Liability. |
If a partnership liability is secured against mixed assets privately owned by the person, and which are encumbered, the value of the liability which relates to the non-primary production part of that asset is not included in the aggregation assessment. For example an encumbered mixed asset may be mortgaged. The partnership balance sheet is adjusted to arrive at a capital account figure for aggregation assessment.
Company has the same meaning as in the Income Tax Assessment Act 1997.
For the purposes of income and assets assessment, a sole trader is a business owned by one person.
The business:
The owner is:
The principal home has the meaning given by subsection 5LA(1) [6] of the VEA and subsection 5LA(2) [6] 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.
Curtilage is the land adjacent to the exempt principal home [3]. A certain amount of curtilage is disregarded for the assets test. [3]. The amount of curtilage that is exempt depends on whether the private land use test [3] described in section 5LA(3) of the VEA, or the extended land use test [3] 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.
The capital accounts of a business partnership record the capital contribution of each partner to the net assets of the partnership. The accounts may either:
If the capital accounts are fixed, a separate current account is kept for each partner. The partnership's current account then records the changes in the equity of each partner.
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16377%23comment-form
[2] https://clik.dva.gov.au/book/export/html/16377#tgt-cspol_part10_ftn416
[3] https://clik.dva.gov.au/%23
[4] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-vea
[5] https://clik.dva.gov.au/book/export/html/16377#ref-cspol_part10_ftn416
[6] http://clik.dva.gov.au/legislation-library