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Edited version of private ruling
Authorisation Number: 1011594867187
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Ruling
Subject: exceptional circumstances exit grant
Is the exceptional circumstances exit grant assessable to you rather than the operating trust?
Yes.
This ruling applies for the following period
1 July 2009 to 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts and circumstances
You are a beneficiary of a trust. This trust acquired a farm and traded until it was sold.
You applied to Centrelink for an exceptional circumstances exit grant. In your application, a declaration was made by you agreeing that you will leave the farming industry and will not become an owner or operator of an agricultural enterprise within five years of the date of settlement.
Correspondence from Centrelink, informed you that a payment would be credited to your account.
This correspondence stated that you must tell Centrelink if you become an owner or operator of an agricultural enterprise within five years from the date of settlement, as the amount of the grant paid to you will become recoverable as a debt to the Commonwealth.
Reasons for decision
A contractual right is created when you enter into the agreement with the Commonwealth not to be involved in an agricultural enterprise for at least five years. As you agree not to return to agricultural enterprise for a period of five years, the grant is for entering into a restrictive covenant.
The restrictive covenant is created between the Commonwealth and you only. The grant was made to you and it is only you who is required to advise the Commonwealth if you become an owner or operator of an agricultural enterprise again within five years. Further, the amount of the grant is recoverable as a debt to the Commonwealth from you only.
The restrictive covenant is a separate asset from the farming enterprise. Therefore, as it was you who received the grant, it is you who is assessable on it.