• Is the creation of a present entitlement to the net income of the trust a payment?

    No. The creation of a present entitlement to the net income of the trust is not a payment.

    Example 4

    Declaration of present entitlement in favour of private company not a payment

    Mary is a shareholder of M Pty Ltd, which is a beneficiary of the Z Trust. On 29 March 2007, Mary receives a $10,000 loan from the Z Trust. The trustee of the Z Trust declares present entitlement to $100,000 of the net income of the trust on 30 June 2007 and this is paid to M Pty Ltd on 29 May 2008.

    The declaration of the $100,000 present entitlement to the net income of the trust in favour of M Pty Ltd is not taken to be a payment for the purposes of whether the trustee has paid the present entitlement due to M Pty Ltd before the earlier of the due date for lodgment or date of lodgment of the trust's tax return for the 2007 income year. It is the payment on 29 May 2008 that is relevant for this purpose.

      Last modified: 18 Aug 2010QC 17634