Social Security (Primary Production Concession) Principles 2017

These Principles are the Social Security (Primary Production Concession) Principles 2017.

These Principles commence on 1 April 2017.

In these Principles, unless the contrary intention appears:

Act means the Social Security Act 1991.

company means a controlled private company.

trust means a controlled private trust.

These Principles set out decision-making principles with which the Secretary must comply in making the following determinations:

a determination under paragraph 1208U (1) (f) of the Act that that paragraph applies to an individual and a trust that is a controlled private trust in relation to the individual;

a determination under subsection 1208W (2) of the Act that the value of a specified asset owned by a company or a trust is to be reduced by the whole or a specified part of a specified liability;

a determination under subsection 1208Y (2) of the Act that, for the purposes of Division 11 of Part 3.18 of the Act, an asset that is owned by a company that is a controlled private company in relation to an individual, or a trust that is a controlled private trust in relation to an individual, is taken not to be controlled by the individual;

a determination under subparagraph 1208Z (2) (a) (ii) or (b) (ii) of the Act that a specified percentage, lower than 100%, is the adjusted net value of an asset controlled by an individual;

a determination under subparagraph 1209 (1) (b) (ii) of the Act that, for a particular tax year, a specified percentage, lower than 100%, of the net income of a primary production enterprise carried on by a company that was a controlled private company in relation to an individual throughout that tax year is to apply in relation to the individual and the enterprise for that tax year;

a determination under subparagraph 1209 (1) (c) (ii) of the Act that, for a particular tax year, a specified percentage, lower than 100%, of the net income of a primary production enterprise carried on by a trust that was a controlled private trust in relation to an individual throughout that tax year is to apply in relation to the individual and the enterprise for that tax year.

Part 2 Determination of application of paragraph 1208U (1) (f) of Act

This Part sets out decision-making principles with which the Secretary must comply in making a determination under paragraph 1208U (1) (f) of the Act that that paragraph applies to an individual and a trust that is a controlled private trust in relation to the individual.

The Secretary must consider whether the individual has had a long-term connection with primary production, in relation to which, for some reason, there has been an interruption in the period of 3 years immediately before the test time, with the result that, at that time, the requirements of subparagraphs 1208U (1) (e) (i), (ii) and (iii) of the Act are not able to be satisfied in relation to the individual.

For subsection (1), an individual is taken to have had a long-term connection with primary production if, for a period of 20 years (whether the period is continuous or is made up of 2 or more periods that total 20 years), the individual, or the individual’s spouse:

has been involved in the carrying on of one or more primary production enterprises; and

has contributed a significant part of his or her labour to the carrying on of those primary production enterprises; and

has derived, either directly or indirectly, a significant part of his or her income from those primary production enterprises.

For the purposes of the application of subsection (2) to an individual at a particular time, a reference to the individual’s spouse is a reference to a person who was the spouse of the individual at that time (whether or not the person is the spouse of the individual at the test time).

For paragraph (2) (c), an individual, or an individual’s spouse, is taken to have derived income indirectly from a primary production enterprise if the income was derived from a company, trust or business partnership that carried on the primary production enterprise.

This section applies in relation to the individual if, at any time during the period of 3 years that ended before the test time, the first primary production enterprise was being carried on by an entity, other than:

the individual or the individual’s spouse; or

a company that was a controlled private company in relation to the individual or the individual’s spouse; or

a trust that was a controlled private trust in relation to the individual or the individual’s spouse; or

a business partnership of which the individual, or the individual’s spouse, was a partner.

The Secretary must consider:

the amount that is the average of the following amounts in relation to the first primary production enterprise:

the net income (if any) of the enterprise for the last tax year that ended before the test time;

the net income (if any) of the enterprise for the tax year that preceded the tax year mentioned in subparagraph (i);

the net income (if any) of the enterprise for the tax year that preceded the tax year mentioned in subparagraph (ii); and

any reductions or adjustments that might have been made to the amounts mentioned in subparagraphs (a) (i), (ii) and (iii) if the entity that had carried on the first primary production enterprise in the tax years mentioned in those subparagraphs had been:

the individual or the individual’s spouse; or

a company that was a controlled private company in relation to the individual or the individual’s spouse; or

a trust that was a controlled private trust in relation to the individual or the individual’s spouse; or

a business partnership of which the individual, or the individual’s spouse, was a partner.

In this section:

first primary production enterprise means the first primary production enterprise mentioned in paragraph 1208U (1) (b) of the Act.

tax year, in relation to a primary production enterprise, means a tax year of the entity that carried on the enterprise.

test time means the test time in relation to the individual mentioned in subsection 1208U (1).

Part 3 Determination of reduction of value of specified asset

This Part sets out decision-making principles with which the Secretary must comply in making a determination under subsection 1208W (2) of the Act that the value of a specified asset owned by a company or a trust is to be reduced by the whole or a specified part of a specified liability.

The Secretary must consider whether the specified liability arose from a genuine arm’s length transaction between the company or trust that owns the specified asset and another entity.

A transaction is taken to be a genuine arm’s length transaction for the purposes of subsection (1) if the transaction:

relates to an arrangement that relates to the specific business activities of the company or trust; and

is not with, or does not relate to an arrangement with, a person who is a minor; and

is made under a written agreement that is signed by each party to the agreement and witnessed by an independent person.

Provided the requirements in subsection (2) are met in relation to a transaction, the transaction may be a transaction between the company or trust that owns the specified asset and an individual who is the sole attributable stakeholder of the company or trust.

In this section:

minor means a person who has not turned 18, but does not include a person (other than a student) who:

has turned 16; and

is engaged on a full-time basis in an occupation, including an office, employment, trade, business, profession, vocation or calling.

student means a person who has turned 16, but has not turned 18, who is enrolled in a full-time course of study at a school, college, university or similar educational institution.

Part 4 Determination that asset is not controlled by individual

This Part sets out decision-making principles with which the Secretary must comply in making a determination under subsection 1208Y (2) of the Act that, for the purposes of Division 11 of Part 3.18 of the Act, an asset that is owned by a company that is a controlled private company in relation to an individual, or an asset that is owned by a trust that is a controlled private trust in relation to an individual, is taken not to be controlled by the individual.

The Secretary must consider whether it is likely that the individual would be considered to be an attributable stakeholder of the company or trust that owns the asset.

If the asset is owned by a trust that is a concessional primary production trust in relation to the individual, the Secretary must consider whether it is likely that, but for the fact that the trust is a concessional primary production trust in relation to the individual, the individual would be considered to be an attributable stakeholder of the trust.

In considering the matters mentioned in subsections (1) and (2), the Secretary must have regard to the decision-making principles set out in Part 2 of the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017.

Part 5 Determination of adjusted net value of asset controlled by individual

This Part sets out decision-making principles with which the Secretary must comply in making a determination under subparagraph 1208Z (2) (a) (ii) or (b) (ii) of the Act that a specified percentage, lower than 100%, is the adjusted net value of an asset controlled by an individual.