Primary production aggregation for private trusts and private companies 043-04100030

• It is necessary to aggregate the primary production assets and liabilities of private trusts and companies attributed to a customer with the other primary production assets and liabilities of the customer. There is provision for all assets and liabilities to be identified as either primary production or non-primary production. The primary production aggregation rules apply
• When assets and liabilities are passed to a customer or to another organisation they pass as primary production or non-primary production assets. This allows the primary production attributed assets and liabilities to be aggregated with the customer's other primary production assets or liabilities
• The normal business rules will apply in regard to primary production assets, that is, they can be a negative amount when passed from an organisation to another organisation or person. If it is a negative primary production amount passed across to another organisation or person then the negative amount can be offset against other positive primary production assets. The negative amount can increase the negative amount within the organisation and this increased negative can then be passed to another organisation or person
• The non-primary production assets of an organisation or person cannot be reduced by any negative primary production assets of the organisation or person

For Complex Assessment Officers (CAO) only

• When calculating the attributable assets of an entity, two totals are calculated, the attributable primary production assets and the attributable non-primary production assets
• Assets which need to be recorded as primary production can be recorded on the Real Estate Details (RE) screen and the Other Assets (OAS) screen
• Real estate items which are recorded with a type of 'Farm/Primary Production', 'Market Garden' or 'Hobby Farm' on the RE screen are treated as primary production assets
• On the OAS screen in the entity record there is an input field for recording whether the asset is a primary production asset
• The Trust/Company Liabilities (TRLD) screen also has an input field for recording whether the liability is a primary production liability
• The non-primary production liabilities are deducted from the non-primary production assets to calculate the attributable non-primary production assets. Where the result is negative the system will set the attributable non-primary production assets to zero
• The primary production liabilities from the primary production assets to calculate the attributable primary production assets
• The system will then pass two asset amounts to the customer record. If the customer has personally owned primary production assets, the system will perform any offsetting needed to correctly apply the aggregation rules

• A loan by a person, to a primary production trust, might not be allowed as a liability of that trust if it does not satisfy the requirements of a genuine liability, but may still be regarded as a personal asset of the person
• Loans are generally regarded as financial assets and attract a deemed income assessment
• These loans are not to be regarded as primary production assets and cannot be offset by the person's primary production liabilities. In other words, these loans cannot be included in aggregation assessments

For more information, see Policy for a link to the Guide to Social Security Law 1991 for recognised and non-recognised liabilities of a controlled private trust and controlled private company and for arm's length and non-arm's length loans

From 1 January 2002, all of a customer's interests in a trust and company are assessable.

An entity in which a customer has an interest may have interests in other trusts or companies. These other trusts or companies will be assessed in accordance with the Trusts and Companies provisions of Part 3.18 of the Act. The assets and liabilities of these additional entities will be attributed, where appropriate, to the controllers of those companies or trusts.

The net primary production assets or primary production liabilities of the additional entities, which are attributable to the first entity, will be taken into account in the aggregated net primary production assessment of the first entity and the net result will be passed over, by attribution to the controller of the first entity.

It should not be assumed that the first trust or company is necessarily attributed with the assets and income of the subsequent trust(s) or company(ies).

These trusts or companies may be owned by the first trust and distribute profit in accordance with this ownership. However, for purposes of assessment under Part 3.18 of the Act, the controller(s) of these trusts or companies may be parties other than the first trust.

For example, a customer may be the controller (through his position as appointor, under the deed of the second trust) of a unit trust that has all of its units owned by the first trust. The customer, and not the first trust, may be directly attributed with the income and assets of the second trust.

A similar approach is to be taken where the trust is a non-trading trust but derives its income from its interest in a partnership which is a primary production partnership.

The adjusted value of the trust's partnership capital account will be included in the assessment of the trust's assets and income. Net primary production assets or primary production liabilities will be taken into account in the aggregation assessment.