F. Revised means test treatment of private trusts and private companies
1 January 2002
This measure will align the social security assets test treatment of persons using private trusts and private companies to hold assets with that of individuals who personally own similar levels of assets.
The new rules mean that where a person controls or has contributed to a private company or private trust, the income and assets of that company or trust may be taken into account when assessing that person's entitlement to income support. Peoples' interests in public companies or listed trusts will not be affected.
The use of private companies and trusts has increased significantly over the past ten years. Many have been created for tax and other reasons. Some have been created specifically to gain entitlement to an income support payment. But for whatever reason they were established, the end result is that social security payments may be being made to individuals with considerable resources. This is unfair.
This announcement comes after months of community consultations following the release late last year of a discussion paper Private Trusts and Private Companies: Maintaining the Integrity of the Means Test which outlined the Government's proposal to change how these structures are treated under the social security means test.
This initiative aims to ensure that customers who hold their assets in private companies or trusts receive equal treatment under the means test to those customers who hold their assets directly. It involves attributing the assets and income of the structure to the person(s) who controls it or who was the source of the capital. Customers will have plenty of time between now and when the new rules apply to seek advice on the implications of the new rules for them.
Clear rules of attribution will apply to cover different types of structure eg testamentary trusts and trusts operated for the benefit of persons unable to manage their own affairs.
There are concessions for people with special circumstances to ensure no one is unfairly disadvantaged. Firstly, the Secretary to the former Department of Family and Community Services will have the discretion to not apply the measure in order to avoid unfair or unintended outcomes. Secondly, the existing means test concessions, eg foregone wages, assets hardship, available to farmers who own their property outright will be extended, where practicable, to farmers who control the family farm through a trust. Thirdly, farmers, in limited circumstances (including where they have no access to the income or capital of the trust and where the value of the farm is no more than $750,000), will be able to retain control over the disposal of the property without having the value of the farm assets attributed to them.