Commonwealth Numbered Acts

SOCIAL SECURITY AND VETERANS' AFFAIRS LEGISLATION AMENDMENT (RETIREMENT ASSISTANCE FOR FARMERS) ACT 1998 NO. 84, 1998 - SCHEDULE 2

1 Section 5 (index)

Insert in their appropriate alphabetical position, determined on a letter-by-letter basis:

eligible descendant	5P(1)
eligible former partner of a qualifying farmer	5P(2)
farm	5P(1)
farm enterprise	5P(1)
proprietary company	5P(1)
qualifying farmer	5P(3) and (4)
qualifying interest	5P(5) and (6)
relevant farm asset	5P(1)
relevant State land law	5P(1)
retirement age	5Q1
transfer	5P(7), (8), (9), (10) and (11)

2 After subsection 5MA(2)

Insert:

(2A) Subsection (2) does not apply:

(a) to a person to whom Division 8 of Part IIIB applies because the person has transferred his or her qualifying interest in a farm in accordance with paragraph 49A(1)(a) or (2)(a); or

(b) if the person's partner has transferred by way of gift:

(i) to an eligible descendant of the person; or

(ii) jointly to an eligible descendant of the person and to the descendant's partner;

his or her qualifying interest in a farm--to the person's partner;

3 Before section 5PA

Insert:

SECT 5P Retirement assistance for farmers definitions (1) In this Act, unless the contrary intention appears:

eligible descendant , in relation to a person, means:

(a) a child, step child or adopted child of the person or of a partner of the person; or

(b) a descendant in direct line of a child described in paragraph (a); or

(c) any other person who, in the opinion of the Commission, should be treated for the purposes of this definition as a person described in paragraph (a) or (b).

farm means any land that is used:

(a) for the purposes of a farm enterprise; or

(b) in connection with a farm enterprise.

proprietary company has the meaning that it has in the Corporations Law.

qualifying farmer has the meaning given by subsections (3) and (4).

qualifying interest has the meaning given by subsections (5) and (6).

relevant farm asset , in relation to a farm, means any livestock, crop, plant or equipment that is a produce of, or is used for the purposes of, the farm enterprise.

relevant State land law means any of the following laws:

(a) the Real Property Act 1900 of New South Wales;

(b) the Transfer of Land Act 1958 of Victoria;

(c) the Land Title Act 1994 of Queensland;

(d) the Transfer of Land Act 1893 of Western Australia;

(e) the Real Property Act, 1886 of South Australia;

(f) the Land Titles Act 1980 of Tasmania;

(g) the Real Property Act 1925 of the Australian Capital Territory;

(h) the Real Property Act of the Northern Territory;

(i) a law of a Territory (other than the Australian Capital Territory or the Northern Territory) making similar provision for the registration of dealings with land as the laws mentioned above.

(a) in relation to a qualifying interest in a farm--has the meaning given by subsections (7), (8), (10) and (11); or

(b) in relation to a qualifying interest in a relevant farm asset--has the meaning given by subsections (9) and (11).

(a) the person was, but no longer is (whether because of death or any other reason), the partner of another person; and

(b) on the day on which the person ceased to be the partner of the other person, the other person was a qualifying farmer; and

(c) after ceasing to be the partner of the other person, the person has not again become a member of a couple; and

(d) the person has a qualifying interest in a farm or farms in which the other person had a qualifying interest.

Note: For qualifying interest see subsection (5).

(a) the person has, has not ceased to have, and has continuously had for a period of at least 15 years, a qualifying interest in a farm; and

(b) during a period of 15 years, the person or the person's partner:

(i) has contributed a significant part of his or her labour and capital to the development of a farm or farms; and

(ii) has derived a significant part of his or her income from that farm or those farms.

Note: For qualifying interest see subsection (5).

(a) the person has a qualifying interest in one or more than one farm; and

(b) the qualifying interest in the farm, or each of the farms, was acquired by the person before 15 September 1997; and

(c) the person or the person's partner or former partner has been involved in farming in Australia for a continuous period of 20 years, or for periods that together add up to 20 years, by:

(i) contributing a significant part of his or her labour to farm enterprises; and

(ii) deriving a significant part of his or her income from farm enterprises.

Note: For qualifying interest see subsection (5).

(a) the person has a legal estate or interest in the farm; or

(b) the person has a transferable legal right or a transferable licence to occupy the farm for a particular purpose of the farm enterprise; or

(c) as the mortgagor of a legal estate or interest in the farm (being an estate or interest that is not registered under a relevant State land law), the person has an equitable estate or interest in the farm; or

(d) the person is a shareholder in a proprietary company that has a legal estate or interest in the farm.

(a) has a legal interest in the farm asset; or

(b) is a shareholder in a proprietary company that has a legal estate or interest in the farm asset.

(a) ceases to be vested in the person; and

(b) becomes vested in the other person.

Note: For relevant State land law see subsection (1).

(a) ceases to be vested in the person; and

(b) becomes vested in the other person.

(a) has, under a relevant State land law, become registered as the proprietor (whether that word or any other word is used) of the legal estate or interest in the farm; and

(b) has then transferred that legal estate or interest to the other person.

(a) has acquired the company's legal estate or interest in the farm or the company's legal interest in the relevant farm asset; and

(b) has then transferred it to the other person.

Insert:

retirement age :

(a) in relation to a person who is a war widow or a war widower but is not a veteran--means the age that would be the pension age for that person if he or she were a veteran; or

(b) in relation to any other person--means the pension age for that person.

Add:

Note: Different provisions apply when working out a person's ordinary income from a farm to find whether the person satisfies the farmers' income test for the purposes of Division 8 (see subparagraph 49J(3)(b)(ii) and paragraph 49J(3)(e)).

Add:

Note: Different provisions apply when working out a person's ordinary income from a farm to find whether the person satisfies the farmers' income test for the purposes of Division 8 (see subparagraph 49J(3)(b)(ii) and paragraph 49J(3)(e)).

Add:

Note: The whole of Division 3 does not apply when working out a person's ordinary income to find whether the person satisfies the farmers' income test for the purposes of Division 8 (see paragraphs 49J(2)(c) and (3)(c)).

Add:

Note: The whole of Division 3 does not apply when working out a person's ordinary income to find whether the person satisfies the farmers' income test for the purposes of Division 8 (see paragraphs 49J(2)(c) and (3)(c)).

Add:

Note: When working out a person's ordinary income to find whether the person satisfies the farmers' income test for the purposes of Division 8, actual returns on financial assets are taken to be ordinary income (see paragraphs 49J(2)(d) and (3)(d)).

Add:

Note: If Division 8 applies in relation to the transfer by a person of a legal estate or interest in a farm or relevant farm asset, that transfer and certain transfers by the person's partner are taken not to be disposal of assets (see section 49C).

Insert:

Division 8--Retirement assistance for farmers Subdivision 1--General SECT 49 Purpose of Division This Division deals with the transfer of farming interests to family members of a younger generation. The purpose of the Division is to provide that, if the conditions set out in the Division are met, the value of any such interests transferred by a qualifying farmer, his or her partner, or a former partner of the qualifying farmer, will be disregarded in determining:

(a) whether a service pension or an income support supplement is payable; or

(b) at what rate a service pension or an income support supplement is payable.

(a) at any time after 14 September 1992 but before 15 September 2000, the person, being then a qualifying farmer, transferred by way of gift to one, or more than one, eligible descendant (either solely to the eligible descendant or jointly to him or her and his or her partner):

(i) his or her qualifying interest in the farm or farms in which he or she had such an interest; and

(ii) all the qualifying interests that he or she had in relevant farm assets; and

(b) the person, or (if the person is a member of a couple) the person or his or her partner:

(i) has reached retirement age; or

(ii) will reach retirement age before 15 September 2000; and

(c) the total value for the purposes of this section of the farm or farms, and the relevant farm assets, referred to in paragraph (a) does not exceed $500,000; and

(d) during the last 3 years before the transfer was completed, the eligible descendant or each of the eligible descendants:

(i) had been actively involved with the farm or any of the farms; or

(ii) would, in the opinion of the Commission, have been so involved but for exceptional circumstances beyond his or her control; and

(e) if the person is a member of a couple--the person's partner does not have:

(i) a legal estate or interest in the farm or farms referred to in subparagraph (a)(i) or in any other farm; or

(ii) a legal interest in any relevant farm asset; and

(f) the person satisfies the farmers' income test for the purposes of this Division.

Note 1: For qualifying farmer , transfer , eligible descendant , qualifying interest , farm and relevant farm assets , see subsection 5P(1).

Note 2: For retirement age see subsection 5Q(1).

Note 3: For the value for the purposes of this section of a farm or relevant farm asset see subsection (4) and for actively involved with a farm see subsection (5).

Note 4: For the farmers' income test see section 49J.

(a) at any time after 14 September 1992 but before 15 September 2000, the person, being then an eligible former partner of a qualifying farmer, transferred by way of gift to one, or more than one, eligible descendant of the farmer (either solely to the eligible descendant or jointly to him or her and his or her partner):

(i) his or her qualifying interest in the farm or farms in which he or she had such an interest; and

(ii) all the qualifying interests that he or she had in relevant farm assets; and

(b) the person has reached retirement age or will reach retirement age before 15 September 2000; and

(c) the total value for the purposes of this section of the farm or farms, and the relevant farm assets, referred to in paragraph (a) does not exceed $500,000; and

(d) during the last 3 years before the transfer was completed, the eligible descendant or each of the eligible descendants:

(i) had been actively involved with the farm or any of the farms; or

(ii) would, in the opinion of the Commission, have been so involved but for exceptional circumstances beyond his or her control; and

(e) the person satisfies the farmers' income test for the purposes of this Division.

Note 1: For eligible former partner of a qualifying farmer , transfer , eligible descendant , qualifying interest , farm and relevant farm assets see subsection 5P(1).

Note 2: For retirement age see subsection 5Q(1).

Note 3: For the value for the purposes of this section of a farm or relevant farm asset see subsection (4) and for actively involved with a farm see subsection (5).

Note 4: For the farmers' income test see section 49J.

(a) immediately before the transfer, the eligible descendant, or one of the eligible descendants, referred to in paragraph (1)(a) or (2)(a) (as the case may be) had a qualifying interest in:

(i) the farm or one of the farms referred to in paragraph (1)(a)(i) or (2)(a)(i); or

(ii) any relevant farm asset; and

(b) the eligible descendant had acquired the qualifying interest in the farm, or in the relevant farm asset, after 14 September 1997; and

(c) the consideration, or part of the consideration, for the interest so acquired was the wages forgone by the eligible descendant while he or she was working as an employee on the farm or any of the farms.

Note: For transfer , eligible descendant , qualifying interest , farm and relevant farm asset see subsection 5P(1).

(a) if paragraph (b) does not apply--the value for the purposes of this section of the farm or relevant farm asset is its value when the transfer is completed; or

(b) if, immediately before the transfer by the person of his or her qualifying interest in the farm or relevant farm asset, the transferee had a qualifying interest in the farm or relevant farm asset--the value for the purposes of this section of the farm or relevant farm asset is its value when the transfer is completed less the value of the transferee's qualifying interest in it at that time.

(a) has contributed a significant part of his or her labour to the development of the farm; or

(b) has undertaken educational studies or training in a field that, in the opinion of the Commission, is relevant to the development or management of the farm enterprise.

(1) If:

(a) a transfer of a kind referred to in paragraph 49A(1)(a) or (2)(a) is completed after 14 September 1997; and

(b) at any time before the transfer but after 14 September 1997, the person making the transfer entered into a transaction or transactions as a result of which:

(i) the value of the farm or farms in which the person had a qualifying interest immediately before the transfer is less than the value that that farm or those farms would have had immediately before the transfer if the person had not entered into the transaction or transactions (the unreduced farm value ); or

(ii) the value of the relevant farm assets in which the person had a qualifying interest immediately before the transfer is less than the value that those relevant farm assets would have had immediately before the transfer if the person had not entered into the transaction or transactions (the unreduced assets value );

(c) the value of that farm or those farms is taken to be an amount equal to the unreduced farm value; and

(d) the value of those relevant farm assets is taken to be an amount equal to the unreduced assets value.

(2) If, when transferring by way of gift to another person his or her qualifying interest in a farm, a person retains a freehold estate, a leasehold interest or a life interest in the dwelling-house on the farm, and the adjacent private land, that constitute the person's principal home, then, for the purposes of section 49A:

(a) the person is taken to have transferred the whole of his or her qualifying interest in the farm by way of gift; but

(b) when assessing the value of the farm, the value of the dwelling-house and the adjacent private land is not to be included.

(3) Subject to this section, apply section 52CA in working out the value of a farm or farms, and any relevant farm assets, for the purposes of this Division.

Note: For transfer , qualifying interest , eligible descendant , farm and relevant farm asset see subsection 5P(1).

(a) the transfer by the person of his or her qualifying interest in a farm or in a relevant farm asset is taken not to be a disposal of an asset (within the meaning of section 52E); and

(b) if the person's partner has also transferred by way of gift to an eligible descendant of the person any qualifying interest in a farm or in a relevant farm asset, that transfer is taken not to be a disposal of an asset (within the meaning of section 52E).

(3) If:

(a) when the transfer referred to in paragraph (1)(a) was completed; or

(b) in the case of such a transfer that was completed before 15 September 1997--on 15 September 1997;

(4) If:

(a) when the transfer referred to in subsection (2) was completed; or

(b) in the case of such a transfer that was completed before 15 September 1997--on 15 September 1997;

Note 1: For transfer , qualifying interest , eligible descendant , farm and relevant farm asset see subsection 5P(1).

Note 2: For retirement age see subsection 5Q(1).

Note: Part IIIAB provides for the payment of a pension bonus to a person who qualifies for an age service pension if the person has deferred claiming that pension for a period of at least one year and the person, or the person's partner, has worked gainfully during that period.

(a) a person, or a person's partner, has reached retirement age; and

(b) this Division applies because of a transfer of qualifying interests by the person or the person's partner; and

(c) the person makes a claim under this Act for a service pension or an income support supplement;

(d) if the transfer was completed before 15 September 1997 and the person makes the claim before 15 September 1998--15 September 1997 or the day on which the person becomes qualified for the pension or supplement, whichever is later; or

(e) if the transfer was completed after 14 September 1997 but before 15 September 1998 and the person makes the claim before 15 September 1998:

(i) the day on which the transfer was completed; or

(ii) the day on which the person becomes qualified for the pension or supplement;

whichever is later; or

(f) if the transfer was completed after 14 September 1998 but before 15 September 2000 and the person makes the claim during the period of 3 months that starts on the day on which the transfer was completed:

(i) the day on which the transfer was completed; or

(ii) the day on which the person becomes qualified for the pension or supplement;

whichever is later; or

(g) in any other case--the day on which the claim is made.

(a) a person, or a person's partner, has reached retirement age; and

(b) this Division applies because of a transfer of qualifying interests by the person or the person's partner; and

(c) the person is receiving a service pension or an income support supplement under this Act; and

(d) the value of the qualifying interests has been included in the value of the person's assets, or the partner's assets, when calculating the rate of the person's pension or supplement.

(a) the rate at which a service pension or an income supplement is being, or has been, paid to a person is less than the rate (the increased rate ) at which it would be, or would have been, paid if the value of the qualifying interests transferred by the person or the person's partner had not been included in the value of the person's assets, or of the partner's assets, in calculating the rate of the person's pension or supplement; and

(b) the person wants the pension or supplement to be paid at the increased rate;

SECT 49G Form of request A request under section 49F must be made in writing and must be in accordance with a form approved by the Commission.

SECT 49H Determination of request (1) If:

(a) a person makes a request under section 49F in respect of a service pension or an income support supplement; and

(b) the Commission is satisfied that the rate at which the pension or supplement is being, or has been, paid to the person is less than the rate at which it would be, or would have been, paid if the value of the qualifying interests transferred by the person or the person's partner had not been included in the value of the person's assets, or the partner's assets, when calculating the rate of the person's pension or supplement;

(2) The determination takes effect:

(a) if the transfer was completed before 15 September 1998 and the person makes the request before that day--on 15 September 1997 or the day on which the transfer was completed, whichever is later; or

(b) if the transfer was completed after 14 September 1998 but before 15 September 2000 and the person makes the request during the period of 3 months that starts on the day on which the transfer is completed--on the day on which the transfer was completed; or

(c) in any other case--on the day on which the request is made.

(1) This is how to work out whether a person who has transferred his or her qualifying interest in a farm or farms satisfies the farmers' income test for the purposes of this Division:

Method statement

Step 1. Work out under subsection (2) the amount of the person's ordinary income (other than ordinary income from farming) for each of the last 3 financial years before the day on which the transfer was completed (the income test years ).

If the person was a member of a couple on the day on which the transfer was completed, work out also under subsection (2) the amount of his or her partner's ordinary income (other than ordinary income from farming) for the 3 income test years.

Add up all the amounts so obtained. The result is called the person's total non-farm income .

Step 2. Work out under subsection (3) the amount of the person's ordinary income from farming for each of the 3 income test years.

If the person was a member of a couple on the day on which the transfer was completed, work out also under subsection (3) the amount of his or her partner's ordinary income from farming for the 3 income test years.

Add up all the amounts of positive income for both the person and the person's partner and deduct from that total the amounts of negative income (if any) for both the person and the person's partner. The result is called the person's total farm income (which may be either positive or negative).

Step 3. Work out the person's total income for the 3 income test years :

(a) if the person's total farm income is a positive amount--by adding that amount to the amount of the person's total non-farm income; or

(b) if the person's total farm income is a negative amount--by deducting that amount from the amount of the person's total non-farm income.

Step 4. Work out under subsection (4) the maximum basic rate for age service pension applicable to the person. Multiply that rate by 3. The result is called the person's maximum basic entitlement .

Step 5. If the person's total income for the 3 income test years is less than the person's maximum basic entitlement, the person satisfies the farmers' income test for the purposes of this Division.

If the person's total income for the 3 income test years equals or exceeds the person's maximum basic entitlement, the person does not satisfy the farmers' income test for the purposes of this Division.

Person's ordinary income from all sources other than farming

(2) For the purpose of working out a person's ordinary income from all sources other than farming during a financial year, the following provisions have effect:

(a) Divisions 1, 4, 6 and 7 of this Part apply to the person;

(b) Division 2 of this Part applies to the person as if any reference in that Division to a tax year were a reference to that financial year;

(c) Division 3 of this Part does not apply to the person;

(d) any return on a financial asset that the person has actually received during the financial year is taken to be ordinary income of the person.

(3) For the purpose of working out a person's ordinary income from farming during a financial year, the following provisions have effect:

(a) Divisions 1, 4, 6 and 7 of this Part apply to the person;

(b) Division 2 of this Part applies to the person as if:

(i) any reference in subsection 46B(1) to a tax year were a reference to that financial year; and

(ii) subsection 46B(2) and section 46C were omitted;

(c) Division 3 of this Part does not apply to the person;

(d) any return on a financial asset that the person has actually received during the financial year and that relates to a farm or a relevant farm asset is taken to be ordinary income of the person from farming;

(e) if, at the end of the financial year, the value of all trading stock on hand that relates to a farm is less than the value of all such trading stock on hand at the beginning of that financial year--the amount of the difference is to be deducted from that part of the person's ordinary income from farming for that financial year that is income in the form of profits;

(f) there is also to be deducted from the person's ordinary income from farming:

(i) losses and outgoings that relate to a farm and are allowable deductions for the purposes of section 51 of the Income Tax Assessment Act 1936 or section 8-1 of the Income Tax Assessment Act 1997 , as appropriate; and

(ii) depreciation that relates to a relevant farm asset and is an allowable deduction for the purposes of subsection 54(1) of the Income Tax Assessment Act 1936 or Division 42 of the Income Tax Assessment Act 1997 ; and

(iii) amounts that relate to a farm or a relevant farm asset and are allowable deductions under subsection 82AAC(1) of the Income Tax Assessment Act 1936 ;

(g) if a negative result is obtained after applying paragraphs (e) and (f)--the person's ordinary income from farming for the financial year is a negative income;

(h) if paragraph (g) does not apply--the person's ordinary income from farming for the financial year is a positive income.

(4) For the purposes of Step 4 in the Method statement in subsection (1), the maximum basic rate for age service pension applicable to the person is:

(a) if the person was a member of a couple at any time during the 3 years immediately preceding the operative day--an amount equal to twice the amount that was, on the operative day, the maximum basic rate for a partnered person under Module B in Part 2 of Schedule 6; or

(b) if paragraph (a) does not apply--an amount equal to the amount that was, on the operative day, the maximum basic rate for a person who is not a member of a couple under Module B in Part 2 of Schedule 6.

(5) In this section:

income , in relation to a person, has the same meaning as in subsection 5H(1), except that, in addition to any amount that is not income of the person because of subsection 5H(4), (5) or (8), any payment to the person under:

(a) the AUSTUDY scheme; or

(b) the Social Security Act; or

(c) the Farm Household Support Act 1992 ;

operative day means:

(a) if the transfer of the person's qualifying interest in the farm or farms was completed before 15 September 1997--that day; or

(b) otherwise--the day on which the transfer of the person's qualifying interest in the farm or farms was completed.

(18/98)

[ Minister's second reading speech made in--

House of Representatives on 11 March 1998

Senate on 22 June 1998 ]