ARTICLE · 10 FEBRUARY 2010

Trust Structures and Company Beneficiaries – Draft Ruling Released on Unpaid Present Entitlements

Moore Australia

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The implications of unpaid present entitlements ("UPE") owing to company beneficiaries. An UPE broadly exists where a trust has made a distribution of income or capital to a beneficiary which remains unpaid.

AustraliaTax

Abi Mahendranathan

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Trust Structures and Company Beneficiaries - Draft Ruling Released on Unpaid Present Entitlements

On 16 December 2009 the ATO released its keenly awaited Draft Ruling TD 2009/D8 relating to the Division 7A implications of unpaid present entitlements ("UPE") owing to company beneficiaries. An UPE broadly exists where a trust has made a distribution of income or capital to a beneficiary which remains unpaid. This circumstance is very common in private groups of structures, where the use of company beneficiaries is commonplace. Accordingly, this draft ruling has enormous implications for private business structures.

In a nutshell

The Draft Ruling is likely to cause significant concern to private company groups as the ATO have indicated that unpaid trust distributions will, in all but exceptional circumstances, be regarded as a loan. This will mean that such entitlements would be required to bear interest at the statutory rate and, more significantly, be

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