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Social security treatment of unlisted property trusts



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Joint Statement

SENATOR THE HON GRAHAM RICHARDSON MINISTER FOR SOCIAL SECURITY

THE HON BEN HUMPHREYS MINISTER FOR VETERANS' AFFAIRS

EMBARGOED UNTIL MIDNIGHT 1 DECEMBER 1991

SOCIAL SECURITY TREATMENT OF UNLISTED PROPERTY TRUSTS

The social security treatment of investments in certain property trusts is to be eased to take into account the changed circumstances of the industry and its investors.

The Ministers for Social Security and Veterans’ Affairs, Senator Graham Richardson and Ben Humphreys today announced the Government's decision which follows representations from the industry.

The decision complements other steps the Government has taken to restore stability to the industry, and to give it time to restructure. In July, the Government announced a 12 month notice period for the withdrawal of funds by investors.

Some fund managers are restructuring through trusts being terminated and investors being paid out with units in other trusts. These merged trusts may then be listed.

Under the Social Security income test on pensions, this would be treated as realising the investment in the trusts which have been terminated. For investments made before 9 September 1988, up until now this has meant that capital growth in the

terminated investments would be assessed as income over a period of 12 months. Income would also be assessed on the new investment as it accrued.

"If no action were taken, the restructuring of trusts, especially those with a large number of pensioner investors, would be hampered," Senator Richardson said.

"To assist restructuring, the Government has decided that the department will not assess as income any capital growth on pre 9 September 1988 investments in the trusts to be terminated. The department will only assess income in the merged trusts

following such restructurings as it accrues, as occurs now with all new investments of this type.

Senator Richardson emphasized that these rules apply only where unlisted property trusts are restructured before 23 July 1992 by paying out investors in trusts with units in another trust.

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"The changes will benefit pensioner investors in such property trusts and help bring stability to the industry", Senator Richardson said.

The Ministers urged fund managers who are contemplating restructuring to contact the Social Security Department to get a firm ruling on how their restructuring would be treated.

They also urged fund managers to seek an early determination from the Department on the ongoing rate of assessment to be applied to investments in the merged trusts. This will ensure that the Department accurately reflects the returns accruing to trust investors in their assessments.

"This will also enable fund managers to provide accurate advice to their investors on the social security implications. The Social Security Department's Financial Information Service can also help by explaining this special treatment to pensioner

investors", Senator Richardson said.

"It is propopsed to introduce legislation to enact these changes in the Autumn 1992 session of Parliament", Senator Richardson and Mr Humphreys said. "Pending that legislation, we will be administering the provisions in accordance with the

Government's decision."

Information:

Senator Richardson's Office Anne McCaig (06) 2777560

GR 35/91

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