Last updated 27 November 2012
VEA ? [2]
The basic approach for the attribution of the income of a private trust or private company is as follows:
An exception involves distribution of the income of an entity to an attributable stakeholder's spouse. The distribution is not treated as a gift of the stakeholder and is not subject to deprivation. A pensioner who is an attributable stakeholder of a controlled entity can request a reassessment of his/her circumstances at any time.
More ? [6]
VEA ? [7]
If an individual is an attributable stakeholder of a controlled private trust [3] or controlled private company [3] and receives distributions from the structure, only those distributions that exceed the income attributed to the controller are assessed as ordinary income of the individual. Prior year profits distributed to controllers are disregarded for income purposes. This is because the distribution is already assessed against the stakeholder through the attribution process. Prior year profits will most likely have already been assessed against controllers in prior years, so for equity purposes and to prevent double counting they are not assessable as income against controllers.
An imputation credit (also known as a franking credit) is a tax credit to a person receiving a dividend payment, for the tax that has already been paid on the dividend payment by the issuing company. An imputation credit is part of a person's assessable gross income.
The distribution amount on the pensioner's tax return should include any share of imputation credits. There is no requirement for the pensioner to separately notify their receipt of these payments.
If a person is deemed not to be the controller of the trust or of a private company, the person will be assessed on the actual distributions or dividends (including imputation credits) made by the private trust or company for twelve months after the date of distribution.
A business can also make a capital profit on the sale of a non-current asset. This occurs where the sale price of the asset exceeds its book value. The profit is calculated as the difference between the sale price and the book value of the asset (net of depreciation). Capital profit on the sale of an asset is treated the same as other profits and is included in the attributable income of the trust or company.
A company's profit [3] is usually calculated with regard to the normal trade of that company, ie comparing sales revenue to the cost of the goods that are sold. It is possible for a company which manufactures nails to make a profit by the manufacture and sale of those nails. A profit can also be made if the buildings in which those nails are made increase in value. This would be a capital profit. Capital profits made by revaluation of assets are usually transferred to the Asset Revaluation Reserve where they can be retained for an indefinite time before distribution. Distributions from Asset Revaluation reserves are income for departmental purposes and are assessed like any other distributions or profit.
Attribution of income
Section 52ZZK [8] VEA
Certain amounts to be taken to be received over 12 months
Section 46A [8] VEA
Ordinary income of a trust or company
Section 52ZZM [8] VEA
No double counting of attributed income
Section 52ZZL [8] VEA
Permissible reductions of business and investment income
Section 52ZZO [8] VEA
An asset means any property, including property outside Australia.
An entity means any of the following:
an individual,
a company,
a trust,
a business partnership,
a corporation sole,
a body politic.
According to section 52ZZJ of the VEA [17], a person is an attributable stakeholder if a company or trust is a controlled private company or trust in relation to the individual unless the Commission determines otherwise.
If the individual is an attributable stakeholder of the trust or company, the individual's asset attribution percentage in relation to the trust or company is:
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:
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 [17].
According to section 5H of the VEA [18] income is:
According to section 52ZZH of the VEA, a trust is a controlled private trust in relation to an individual if the company is a designated private trust and the individual passes either the:
According to section 52ZZC of the VEA, a company is a controlled private company in relation to an individual if the company is a designated private company and the individual passes either the:
Profit, for a business, is the amount of earnings in excess of its expenses over 12 months.
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16518%23comment-form
[2] https://clik.dva.gov.au/book/export/html/16518#tgt-cspol_part10_ftn481
[3] https://clik.dva.gov.au/%23
[4] https://clik.dva.gov.au/book/export/html/16518#tgt-cspol_part10_ftn482
[5] https://clik.dva.gov.au/book/export/html/16518#tgt-cspol_part10_ftn483
[6] https://clik.dva.gov.au/book/export/html/16518#tgt-cspol_part10_ftn484
[7] https://clik.dva.gov.au/book/export/html/16518#tgt-cspol_part10_ftn485
[8] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-vea
[9] https://clik.dva.gov.au/book/export/html/16518#ref-cspol_part10_ftn481
[10] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/103-business-structures-and-trusts/1037-attribution-percentage-derivation-and-attribution-period-01012002/attribution-percentage
[11] https://clik.dva.gov.au/book/export/html/16518#ref-cspol_part10_ftn482
[12] https://clik.dva.gov.au/compensation-and-support-policy-library/part-11-administration-payments/111-income-support-effective-dates-and-pension-periods/1114-determining-effective-dates-variations-and-terminations/date-effect-annual-reviews
[13] https://clik.dva.gov.au/book/export/html/16518#ref-cspol_part10_ftn483
[14] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/103-business-structures-and-trusts/10313-reassessment-overpayments-private-trust-or-company-01012002/reassessment-controlled-private-trust-or-company
[15] https://clik.dva.gov.au/book/export/html/16518#ref-cspol_part10_ftn484
[16] https://clik.dva.gov.au/book/export/html/16518#ref-cspol_part10_ftn485
[17] http://clik.dva.gov.au/legislation-library
[18] http://clik/health-procedure-library/health-information-and-management-notes-himn/vhc/072014-vhc-veterans-home-care