The principles set out in TR 2010/3 and PS LA 2010/4 apply to COMPANIE-based UFEs, including another trust. Therefore, if Trust A appoints income to Trust B (a trust belonging to the same family group) but does not pay the funds to Trust B, UPE is able to obtain financial back-housing and may be a loan for divisions 7A purposes, unless the conditions set out in PS LA 2010/4 are met. This is shown in Figure 1. When an agent has a certain number of EUs and these were created before and after December 16, 2009, the agent may decide, at the company`s request or not, to pay a UPE born before or after December 16, 2009. In other words, there is no obligation to pay the UPEs first until December 16, 2009. The Commissioner considers that a UPE due to a related business is not considered a loan if the funds representing UPE are held exclusively for the benefit of the related company. Note that this press release does not take into account the consequences of the other sub-trusts described in PSLA 2010/4 (for example. B Investment Option 2 – UPE funds invested in a ten-year interest rate loan). In addition, it does not take into account measures that can be taken under Option 1 agreements (seven-year interest rate only) in subsequent years. It is likely that the ATO will be able to make follow-up statements for these future years and we will inform our clients of future developments. In June 2016, Trust A named its full net profit, but did not pay it to Trust B. Similarly, Trust B names all of its net income, but does not pay the amount to PrivCo C. Prior to the day of Trust B`s 2016 tax return, the trustee decides to place the payable EPU from Trust B to PrivCo C on a sub-trust for the exclusive benefit of PrivCo C using one of the investment options in PS LA 2010/4.
The investment agreement not only demonstrates the subtruse`s investment in core trust, but also helps to demonstrate that the agent has decided to hold the funds representing UPE for the exclusive benefit of the private beneficiary company. In response to the public consultations on TR 2010/3, the ATO has identified in psLA 2010/4 a number of options that would prevent the ATO from applying Division 7A to these UPE balances. These options were separate from the standard solution for the conclusion of a Division 7A loan agreement to cover the UPE loan. It is not necessary to have a separate act of trust for trust. Many acts of trust already provide for the establishment of trust. We strongly advise you to carefully read your position of trust before establishing a relationship of trust, to ensure that this is within the competence of the agent.