Federal legislation to be introduced as early as July this year will affect all benefit and pension payments, except the Family Payment, from 1 July 2001.
It is planned to assess assets held in family trusts against pensions or benefits received as Centrelink income support.
If Centrelink proves that a recipient fails the control test indicated below, assets held in private companies and trusts will be made subject to the assets test and will be deemed to generate an income.
Formal control is deemed to exist when a person:
• is the trustee or can appoint the trustee
(i.e. is the Appointor)
• has the power to vary the deed or veto the trustee’s decisions (i.e. is the Guardian)
• alone, or with associates,
controls 50 per cent or more of a corporate trust’s voting power (as a shareholder or director)
• alone, or with associates, has a direct or indirect interest
in at least 15 per cent of the capital or income of a trust.
The definition of associates is critical.
It includes family and relatives, and may even trap trusts that belong to other members of the family if a person holds an office for that trust entity.
The Government also intends to include private companies in this legislation.
Informal control exists when:
• a person is capable, under a scheme, of gaining control of the trust or company
• the trustee may reasonably be expected to act in accordance with directions or wishes of a person.
The Centrelink proposals are not law, but no opposition is expected in the Senate.
At present, the fine detail of the proposals is also unknown but will be published as information is released.
