Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000

Administered by Department of Social Services

Legislation au F2007B00425 Not in force Legislative Instrument

Legislation content

EXPLANATORY STATEMENT

Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000

Summary

Section 1209E of the Social Security Act 1991 (the Social Security Act) provides that the Secretary may formulate principles to be complied with by him or her when making decisions under a number of sections of the Social Security Act, including section 1207X.

The purpose of this instrument is to set out decision-making principles that the Secretary must comply with in making determinations under section 1207X of the Social Security Act. Such determinations relates to whether an individual should not be assessed as an attributable stakeholder of a trust or company and, if they are to be assessed, the asset and income attribution percentages that are applicable.

Background

The Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testing) Act 2000 amended the Social Security Act to give effect to a measure in the Government's 2000-2001 Budget to revise the means test treatment of private companies and private trusts. The measure aims to ensure that customers who hold their assets in private companies or private trusts receive comparable treatment under the means test to those customers who hold their assets directly. The assets and income of the structure will be attributed to the person or persons who control the company or trust, or to the person or persons who were the source of the capital or corpus of the company or trust.

Section 1207X of the Social Security Act states that where a company is a controlled private company in relation to an individual, or a trust is a controlled private trust in relation to an individual, then, unless the Secretary otherwise determines, the individual will be attributed with 100% of the assets and income of the controlled structure. These decision-making principles will assist the Secretary in determining whether an individual should not, in fact, be attributed with any of the assets or income of the controlled structure, or should be attributed with a percentage of the assets and income of the structure which is less than 100%.

Explanation of the provisions

Part 1

Section 1 of the Principles states the name of the disallowable instrument and section 2 states that the Principles commence on gazettal. Section 3 contains interpretation provisions. Section 4 sets out the purpose of the instrument.

Part 2

Section 5 sets out the purpose of Part 2 of the instrument, which is to provide decision-making principles that can be used in making a determination, under paragraph 1207X(1)(a) or 1207X(2)(c), that an individual is not an attributable stakeholder of a trust or company.

Section 6 states that this Part applies if an individual would be an attributable stakeholder, but for a determination by the Secretary under this Part. The Secretary must consider the relationship between the individual and the company or trust, having regard to the circumstances mentioned in this Part and also the reason why, but for a determination under this Part, the individual would be an attributable stakeholder of the company or trust. Taking these considerations into account, the Secretary must consider whether there is a sufficient basis to determine that an individual should not be an attributable stakeholder of the company or trust.

Section 7 provides that the Secretary must consider whether there are relevant circumstances that make it inappropriate for an individual to be an attributable stakeholder of a company or trust. In particular, the Secretary must consider the effect of circumstances arising from the legal structure of the company or trust, the administrative arrangements of the company or trust, and finally, whether the individual can reasonably be expected to exercise effective control in relation to the company or trust.

Section 8 states that where an individual has made a contribution to a company or trust, the Secretary must consider the circumstances in which that contribution was made. Those circumstances include the value of the contribution, the proportion that the value of the contribution has to the total assets of the company or trust, the effect of the contribution on the financial position of the company or trust and the amount of any consideration received by the individual for the contribution.

Section 9 provides that the Secretary must consider past distributions from the company or trust to the individual, including the number of times, and frequency, that distributions have been made to the individual and the value of those distributions. For the purposes of this section “distribution” is defined to include a distribution of capital or income of a company, or the corpus or income of a trust.

Section 10 states that the Secretary must consider the reasonable foreseeability of the individual receiving future distributions from the company or trust, and the possible value of those distributions. In considering this matter the Secretary must have regard to the constituent documents of the company or trust. For the purposes of this section “distribution” is defined as for section 9.

Section 11 allows the Secretary to consider whether an individual receives any other kind of benefit from the company or trust. For the purposes of this section “benefit” is defined to include a benefit received or derived in the form of property or services, but is not limited to a benefit to which the individual has a legal or equitable entitlement.

Section 12 provides that the Secretary must consider whether an individual has been assessed as an attributable stakeholder of any other company or trust under the Social Security Act, or as an attributable stakeholder of any company or trust under the Veterans’ Entitlements Act 1986 and, if so, the Secretary can then consider the asset and income attribution percentages applied to the individual in relation to any of those companies or trusts.

Section 13 states that the Secretary must consider any other circumstances that relate to the individual’s involvement with the activities or administration of the company or trust.


Part 3

Section 14 sets out the purpose of Part 3 of the instrument, which is to provide decision-making principles that can be used in making a determination under subparagraph 1207X(1)(b)(ii) or 1207X(2)(d)(ii) of the Social Security Act that an individual has an asset attribution percentage, in relation to the company or trust, of less than 100%.

Section 15 states that this Part applies if an individual would, but for a determination by the Secretary under this Part, have an asset attribution percentage of 100%. The Secretary must consider the relationship between the individual and the company or trust, having regard to the circumstances mentioned in this Part and whether any of those circumstances provide a sufficient basis to determine that the individual should have an asset attribution percentage of less than 100%.

Section 16 provides that the Secretary must consider whether there are relevant circumstances that make it appropriate for an individual to have an asset attribution percentage of less than 100% in regard to the company or trust. In particular, the Secretary must consider the effect of circumstances arising from the legal structure of the company or trust, the administrative arrangements of the company or trust, and finally, whether the individual can reasonably be expected to exercise effective control, and, if so, the extent of that control, in relation to the company or trust.

Section 17 states that where an individual has made a contribution to a company or trust, the Secretary must consider the circumstances in which that contribution was made. Those circumstances include the value of the contribution, the proportion that the value of the contribution has to the total assets of the company or trust, the effect of the contribution on the financial position of the company or trust and the amount of any consideration received by the individual for the contribution.

Section 18 provides that the Secretary must consider past distributions from the company or trust to the individual, including the number of times, and frequency, that distributions have been made to the individual and the value of those distributions. For the purposes of this section “distribution” is defined to include a distribution of capital or income of a company, or the corpus or income of a trust.

Section 19 states that the Secretary must consider the reasonable foreseeability of the individual receiving future distributions from the company or trust, and the possible value of those distributions. In considering this matter the Secretary must have regard to the constituent documents of the company or trust. For the purposes of this section “distribution” is defined as for section 18.

Section 20 allows the Secretary to consider whether an individual receives any other kind of benefit from the company or trust. For the purposes of this section “benefit” is defined to include a benefit received or derived in the form of property or services, but is not limited to a benefit to which the individual has a legal or equitable entitlement.

Section 21 provides that the Secretary must consider whether an individual has been assessed as an attributable stakeholder of any other company or trust under the Social Security Act, or as an attributable stakeholder of any company or trust under the Veterans’ Entitlements Act 1986 and, if so, the Secretary can then consider the asset and income attribution percentages applied to the individual in relation to any of those companies or trusts.

Section 22 states that the Secretary must consider any other circumstances that relate to the individual’s involvement with the activities or administration of the company or trust.

Part 4

Section 23 sets out the purpose of Part 4 of the instrument, which is to provide decision-making principles that can be used in making a determination under subparagraph 1207X(1)(c)(ii) or 1207X(2)(e)(ii) that an individual has an income attribution percentage, in relation to the company or trust, of less than 100%.

Section 24 states that this Part applies if an individual would, but for a determination by the Secretary under this Part, have an income attribution percentage of 100%. The Secretary must consider the relationship between the individual and the company or trust, having regard to the circumstances mentioned in this Part and whether any of those circumstances provide a sufficient basis to determine that the individual should have an income attribution percentage of less than 100%.

Section 25 provides that the Secretary must consider whether there are relevant circumstances that make it appropriate for an individual to have an income attribution percentage of less than 100% in regard to the company or trust. In particular, the Secretary must consider the effect of circumstances arising from the legal structure of the company or trust, the administrative arrangements of the company or trust, and finally, whether the individual can reasonably be expected to exercise effective control, and, if so, the extent of that control, in relation to the company or trust.

Section 26 states that where an individual has made a contribution to a company or trust, the Secretary must consider the circumstances in which that contribution was made. Those circumstances include the value of the contribution, the proportion that the value of the contribution has to the total assets of the company or trust, the effect of the contribution on the financial position of the company or trust and the amount of any consideration received by the individual for the contribution.

Section 27 provides that the Secretary must consider past distributions from the company or trust to the individual, including the number of times, and frequency, that distributions have been made to the individual and the value of those distributions. For the purposes of this section “distribution” is defined to include a distribution of capital or income of a company, or the corpus or income of a trust.

Section 28 states that the Secretary must consider the reasonable foreseeability of the individual receiving future distributions from the company or trust, and the possible value of those distributions. In considering this matter the Secretary must have regard to the constituent documents of the company or trust. For the purposes of this section “distribution” is defined as for section 27.

Section 29 allows the Secretary to consider whether an individual receives any other kind of benefit from the company or trust. For the purposes of this section “benefit” is defined to include a benefit received or derived in the form of property or services, but is not limited to a benefit to which the individual has a legal or equitable entitlement.

Section 30 provides that the Secretary must consider whether an individual has been assessed as an attributable stakeholder of any other company or trust under the Social Security Act, or as an attributable stakeholder of any company or trust under the Veterans’ Entitlements Act 1986 and, if so, the Secretary can then consider the asset and income attribution percentages applied to the individual in relation to any of those companies or trusts.

Section 31 states that the Secretary must consider any other circumstances that relate to the individual’s involvement with the activities or administration of the company or trust.

Overview

The Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 were enacted to provide a framework for the Secretary to follow when making decisions regarding the attribution of assets and income to individuals in relation to private companies and trusts under the Social Security Act 1991. This legislation was introduced to address the issue of ensuring equitable treatment under the means test for individuals holding assets in private companies or private trusts, as opposed to holding them directly. The primary objective is to ensure that such individuals receive comparable treatment to those who hold their assets directly. The principles were formulated by the Parliament of Australia to guide the Secretary in making determinations about whether an individual should be considered an attributable stakeholder of a trust or company, and if so, the applicable asset and income attribution percentages. The Social Security and Veterans’ Entitlements Legislation Amendment Act 2000 provided the legislative basis for these principles, aiming to revise the means test treatment of private companies and private trusts. The Act sought to attribute the assets and income of these structures to the individuals who control them or who provided the capital or corpus, unless the Secretary determines otherwise. These principles assist the Secretary in deciding whether an individual should be attributed with less than 100% of the assets or income of a controlled structure or should not be attributed at all.

Scope and Application

The Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 apply to individuals who may be deemed attributable stakeholders of private companies or trusts under the Social Security Act 1991. These principles guide the Secretary in making determinations regarding the attribution of assets and income to individuals, thereby ensuring equitable treatment of social security beneficiaries. The Act applies across the Commonwealth of Australia, governing the means test treatment of private companies and private trusts to ensure consistency in the attribution process. The instrument provides decision-making principles to determine whether an individual should not be assessed as an attributable stakeholder or if they should be attributed with less than 100% of the assets and income of a controlled structure. Exclusions and exemptions are not explicitly stated in the instrument, but the Secretary has the discretion to consider various factors, such as contributions made, distributions received, and other benefits derived from the company or trust. The application of these principles can be extended or restricted through subordinate instruments, allowing for flexibility in addressing specific cases or circumstances.

Key Provisions

The Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 provide the Secretary with detailed guidelines for making determinations under section 1207X of the Social Security Act. These determinations involve whether an individual should not be considered an attributable stakeholder of a trust or company and, if they are to be considered, what the applicable asset and income attribution percentages should be. The Secretary must carefully evaluate various factors to make these determinations. Firstly, under sections 6 and 7, the Secretary must assess the relationship between the individual and the company or trust, taking into account the legal structure and administrative arrangements, as well as whether the individual can reasonably be expected to exercise effective control. Additionally, the Secretary must consider the individual’s contributions to the company or trust, as outlined in sections 8 and 17, including the value and proportion of the contribution, and the effect on the entity’s financial position. Past and foreseeable future distributions, as described in sections 9, 10, 27, and 28, must also be examined, along with any other benefits the individual may receive, as per sections 11 and 29. The Secretary must also consider any other circumstances related to the individual’s involvement with the company or trust, as stated in sections 13, 22, and 31. The Act imposes several obligations on the Secretary when making these determinations. Firstly, the Secretary must thoroughly review the relationship between the individual and the company or trust, considering the legal and administrative frameworks, as well as the potential for effective control. The Secretary must also assess the individual’s contributions to the company or trust, including the value and impact of these contributions on the entity’s financial position. Furthermore, the Secretary must evaluate past distributions and the likelihood of future distributions, taking into account the constituent documents of the company or trust. Additionally, any other benefits the individual receives from the company or trust must be considered. The Secretary must also take into account any other relevant circumstances related to the individual’s involvement with the company or trust. Failure to comply with these provisions could result in significant consequences. While the Act does not explicitly state penalties for non-compliance, breaches of the principles could lead to legal challenges, judicial review, and potential amendments to the determinations made. These consequences could affect the individual's eligibility for social security benefits, leading to financial implications. Therefore, it is crucial for the Secretary to adhere strictly to these principles to ensure fair and accurate determinations.

Legal classification tags

Area of Law
Social Security Law
Taxation Law
Instrument
Regulation
Concepts
Definitions & Interpretation
Reporting & Disclosure Obligations
Regulatory Standards

Interactions

Authorises

All Versions

Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.