Trust payments and other benefits

Division 7A applies to certain benefits provided to shareholders or their associates from trusts where a private company has an unpaid present entitlement (UPE) to the profits of the trust.

For example, private business structures can involve a business being operated by a trust associated with a private company and its shareholders. As a trust beneficiary, the company is presently entitled to the profits made by the trust. However, the profit is not actually paid to the company (thereby constituting a UPE), but used for the benefit of a shareholder or associate. In this situation, the benefit may be treated as a Division 7A dividend paid to the shareholder or associate.

For this purpose, the trust is treated as a notional company and the benefit as a Division 7A dividend paid to the shareholder or their associate.

This figure shows the relationships between a private company, trust and shareholder, or their associate, where the company has an entitlement to the trust's profits, but the entitlement isn't paid but used instead to provide a benefit to the shareholder or their associate, thereby creating a Division 7A dividend, as discussed in the text above.

See also:


Last modified: 14 May 2015QC 45071