• Transactions through interposed entities

    Division 7A may also apply where:

    • a private company pays or loans an amount to an interposed entity on the understanding that the interposed entity or another interposed entity will pay or loan an amount to a shareholder or their associate
    • a trust makes certain payments or loans to an interposed entity on the understanding that the interposed entity or another interposed entity will pay or loan an amount to a shareholder or their associate of a private company with an unpaid present entitlement (UPE) to the profit of the trust. Where another trust is interposed between the private company and the trust from which the payment or loan is made, the company can be taken have a UPE from the net income of the trust making the payment or loan if certain conditions are satisfied.

    This figure shows how a payment or loan by a private company to a shareholder or their associate channelled indirectly through one or more interposed entities can be treated as a Division 7A dividend, as discussed in the text above.

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    Last modified: 14 May 2015QC 45056