Limited appointorship concession 043-04030090

The limited appointorship powers are:

• The appointor can have the power to appoint a new trustee upon the trustee's death, resignation or legal disablement
• The appointor can have the power to veto the sale of the primary production land

A primary producer is a person whose principal occupation is primary production.

The concession is limited to primary producers and their partners where all the following conditions exist:

• The limited appointor is retiring from primary production operations
• The limited appointor and their partner own or control net primary production assets worth less than the primary production attribution threshold. For the primary production attribution threshold, see Rates and Thresholds > Primary Production Attribution thresholds. This amount relates to the total of a person and their partner's personally held primary production income and assets combined with the income and assets of the trust being controlled
• At least 70% of the assets of the trust are primary production assets
• The average adjusted net farm income over the previous 3 years is less than the Family Payment threshold, that is, Part A income free area. For the Part A income free area, see Rates and Thresholds > Primary Production Attribution thresholds
• A family member (eligible descendant) is taking over the operation of the primary production enterprise

An irrevocable clause must be inserted into the trust deed to provide that:

• the appointor's power to appoint a new trustee can only be exercised upon the trustee's death, resignation or legal disablement, and
• any power of veto held by the appointor is limited to the power to veto the sale of the primary production land

The new controller has to be an eligible descendant as defined in section 17A of the Social Security Act. The new controller will be attributed with the income and assets of the trust.

If the limited appointor gave up full control of a discretionary trust before 31 March 2002, then the gifting provisions did not apply. If the limited appointor gave up full control after the 31 March 2002, they gave away control of an attributable asset and the gifting and deprivation rules do apply. An extension until 31 March 2002 was granted by the Minister, for primary producers relinquishing control without the gifting provisions being applied.

The limited appointor cannot have any other position in the trust, including being an income or capital beneficiary.

In addition, neither the limited appointor nor their partner can:

• be the trustee, or be able to be appointed as trustee
• have the power to change the trust deed
• be capital or income beneficiaries of the trust
• enjoy any direct or indirect benefit from the trust

The person must also make a statutory declaration of their resignation from the trust, stating they and their partner will not exert any control over, or benefit in any way from, the trust apart from minor incidental benefits.

Not enjoying any direct or indirect benefit would preclude the person with limited appointorship, and their partner, from receiving any payment or benefit directly or indirectly from the trust, including wages.

Arrangements involving loans to the person with limited appointorship, or their partner, from the trust or the new controller, or the new controller's partner would also be precluded. There are, however, three exceptions to this rule:

• The limited appointor and their partner can retain a life interest in their home if it is situated on the primary production property
• The limited appointor and their partner are allowed some incidental fringe benefits, such as farm produce for personal consumption
• If a 5 year deprivation period applies as a result of the limited appointor relinquishing control, the limited appointor and their partner can receive up to the current Part A income free area amount from the trust during that 5 year period. This could not be paid as a distribution from the trust as the limited appointor and their partner cannot be potential beneficiaries. For the Part A income free area, see Rates and Thresholds - Primary Production Attribution thresholds

The actuarial value from a life interest can be coded as other assets.