These Principles are the Social Security (Modification of Asset Deprivation Rules) Principles 2017.

These Principles commence on 1 April 2017.

In these Principles:

Act means the Social Security Act 1991.

asset disposal provisions means Division 2 of Part 3.12, section 93U, section 93UA and sections 198F to 198MA of the Act.

4 Purpose

These Principles set out decision‑making principles with which the Secretary must comply for the purposes of making a determination under subsection 1208K (1) or 1208L (3) of the Act.

Part 2 Disposal of asset (on or after 1 January 2002) by individual

5 Purpose of Part 2

This Part sets out decision‑making principles with which the Secretary must comply in making a determination for subsection 1208K (1) of the Act.

6 Definitions

In this Part:

individual means an individual who transfers property to a company or trust in accordance with subsection 1208K (1) of the Act.

member of a couple has the same meaning as in section 4 of the Act.

transfer of property means a transfer of property by way of capital contribution.

7 Transferor as sole attributable stakeholder

(1) This section applies to an individual who is not a member of a couple.

(2) The Secretary must take into account whether the individual was the only attributable stakeholder of the company or trust, either before or after the transfer.

8 Transferor as member of couple

(1) This section applies to an individual who is a member of a couple.

(2) The Secretary must take into account whether:

(a) the individual was the only attributable stakeholder of the company or trust, before or after the transfer; or

(b) both members of the couple were the only attributable stakeholders of the company or trust, before or after the transfer.

9 Transfer to company or trust with 2 or more attributable stakeholders

(1) This section applies if, in relation to a transfer of property to a company or a trust:

(a) the transfer is made by an attributable stakeholder of the company or trust; and

(b) before the transfer, there were 2 or more attributable stakeholders of the company or trust.

(2) This section also applies if, in relation to a transfer of property to a company or a trust:

(a) the transfer is made by an attributable stakeholder of the company or trust; and

(b) after the transfer, there were 2 or more attributable stakeholders of the company or trust.

(3) The Secretary must take into account the asset attribution percentage of each attributable stakeholder of the company or trust, before and after the transfer of the property.

10 Transfer to company or trust by individual who becomes attributable stakeholder

(1) This section applies if, in relation to a transfer of property to a company or a trust:

(a) the transfer is made by an individual who is not an attributable stakeholder of the company or trust; and

(b) as a result of the transfer, the individual is an attributable stakeholder.

(2) The Secretary must take into account the asset attribution percentage of each attributable stakeholder of the company or trust, before and after the transfer of the property.

Part 3 Disposal of asset (on or after 1 January 2002) by company or trust

11 Purpose of Part 3

This Part sets out decision‑making principles with which the Secretary must comply in making a determination for subsection 1208L (3) of the Act.

12 Disposal to individual by company or trust

(1) This section applies if:

(a) a company pays a dividend to an individual who is an attributable stakeholder of the company; and

(b) the asset disposal provisions apply, and are taken to have applied, as if the individual had disposed of an asset of the individual.

(2) This section also applies if:

(a) a trust makes a distribution to an individual who is an attributable stakeholder of the trust; and

(b) the asset disposal provisions apply, and are taken to have applied, as if the individual had disposed of an asset of the individual.

(3) The Secretary must consider whether the amount of the dividend or the value of the distribution is reasonable, having regard to the individual’s asset attribution percentage, in relation to the company or trust, before and after the disposal of the asset.

13 Disposal by way of dividend or distribution to genuine investor

(1) This section applies if:

(a) during a derivation period of a company, the company pays a dividend to an individual who is not an attributable stakeholder of the company; and

(b) the individual has, before or during the derivation period, made a genuine transfer of capital to the company.

(2) This section also applies if:

(a) during a derivation period of a trust, the trust makes a distribution to an individual who is not an attributable stakeholder of the trust; and

(b) the individual has, before or during the derivation period, made a genuine transfer of capital to the trust.

(3) For subsections (1) and (2), a transfer of capital is a genuine transfer of capital if:

(a) the individual receives, as consideration for the transfer, shares in the company, or units in the trust, of a value that is equivalent to the value of the capital transferred; and

(b) the individual has a legal or equitable right to a share of the capital on the winding‑up of the company or trust; and

(c) the individual has a legal or equitable right to receive dividends or distributions in accordance with the constituent documents of the company or under the terms of the trust; and

(d) the individual is over 18 years.

(4) The Secretary must consider whether the amount of the dividend or the value of the distribution is reasonable, having regard to the proportion of the value of the capital transferred by the individual to the total value of the assets owned by the company or trust at the time of the transfer.