The interposed entity rules apply to payments made and loans made on or after 1 July 2009.
The trustee is deemed to make a payment or a loan to a target entity where:
- the trustee makes a payment or loan to an interposed entity (the first interposed entity)
- a reasonable person would conclude that the trustee made the payment or loan solely or mainly as part of an arrangement to make a payment or loan to the target entity
- the first interposed entity or another interposed entity makes a payment or loan to the target entity.
If the trustee is taken to have made a payment or loan to the target entity then Subdivision EA applies to the deemed payment or notional loan (refer to the fact sheets Division 7A - trust amounts treated as dividends - payments and Division 7A - trust amounts treated as dividends - loans).
Assuming the conditions under Subdivision EA for payments or loans are met, the arrangements are shown below.
Subdivision EA operates as if the trustee had paid an amount or made a loan directly to the target entity.