Trusts and companies - transitional gifting rule 043-04080020

The purpose of these transitional rules was to prevent double counting. For example without the special transitional arrangements, a customer who transferred assets to a trust in the five year period leading up to 1 January 2002 could be subject to the gift rules in relation to the gift and, after 1 January 2002, could also be attributed with the assets of the trust.

The special rules resulted in a once only adjustment, effective on and from 1 January 2002.

Note: a partnered couple are considered to be one unit. Where assets are transferred between the members of a couple, the gifting rules do not apply. If the couple separates, neither of the customer's deprivation determination of 1 January 2002 was reassessed.

If a customer or a partnered couple had gifted assets to a trust or company before 1 January 1997 there was no adjustment to the deprivation provisions as the customer's or partnered couple's five year deprivation period will cease on or before the new rules were implemented on 1 January 2002.

If a customer or a partnered couple had gifted assets to a trust or company between 1 January 1997 and 31 December 2001 there are three possible effects on amounts held as deprived assets as at 1 January 2002:

• If a customer or a partnered couple (either together or independently) had deprivation assessed and as a result of the new rules was attributed with 100% of the income and assets of the organisation, then that deprivation ceased to be assessed from 1 January 2002
• If a customer or a partnered couple (either together or independently) had deprivation assessed and as a result of the new rules was attributed with less than 100% of the income and assets of the organisation then that deprivation amount would be reduced by the percent amount of attribution from 1 January 2002 for the balance of the five year period
• If a customer or a partnered couple (either together or independently) had deprivation assessed and as a result of these new rules was not attributed with the income and assets of the organisation then that deprivation period would continue for the balance of the five year period