Trusts and companies - recording liabilities 043-04090020

A liability of $100,000 is secured against a pie making machine with a market value of $80,000. Only $80,000 would be allowed as a liability and this is the amount that should be recorded as the total liability.

A liability of $100,000 is secured against a pie making machine with a market value of $80,000 and a farm worth $120,000. As 60% of the assets are primary production assets, $100,000 would be recorded as the total liability, with 60% of this as primary production.

A liability may be secured against an asset(s) which includes a mix of exempt and assessable assets. In this situation the amount of the liability allowed will need to be apportioned.

Example: A trust has assets of $1,000,000 comprising a farm on which the principal residence (worth $300,000) of the 100% entity controller is situated. There is a $400,000 liability which was used to purchase the farm including the principal residence secured against the whole property. As only 70% of the trust assets are assessable, only 70%, or $280,000, of the liability will be allowed. The following would be recorded:

• the farm details on the Real Estate Detail (RE) screen - $1,000,000
• the home and controller's Customer Reference Number (CRN) on the Real Estate Home and Curtilage (REHC) screen - $300,000
• the liability details on the Trust/Company Liabilities (TRLD) screen - $400,000
• the liability category - recognised
• the real estate identification number (RE ID) of the farm (and controller's home)

Where a RE ID is recorded, a value in the Primary Production %: field cannot be recorded as the system will calculate the primary production percentage based on whether the linked real estate item is primary production or not.

Note: the system will also calculate a negative $180,000 home property amount in respect of the controller which will reduce the amount of non-primary production assets attributed to zero. The $420,000 primary production assets would be attributed to the controller. This method caters for all situations, e.g. multiple controllers with multiple homes, and allows the full circumstances to be recorded.