• Working out the amount of deemed payment or loan

    The amount the trustee is taken to have paid or lent the target entity is the amount (if any) determined by the Commissioner.

    In determining the amount of the deemed payment or loan, account must be taken of the amount the interposed entity paid or lent the target entity less any arm's length consideration payable to the target entity from either the trustee or any of the interposed entities.

    In working out the amount of the payment or loan the Commissioner will also take into account if the payment or loan by the trustee to the first interposed entity results in that entity being taken to have received a dividend.

    The total of the amounts determined must not exceed the amount of the unpaid present entitlement that the private company has from the trust.

    Example 3

    Anthony is a shareholder of Tony Pty Ltd and also a beneficiary of the ZTrust. Tony became presently entitled to an amount of $50,000 of the net income of the trust for the 2009-10 income year. That amount remains unpaid.

    On 31 March 2010 the trustee of the Z Trust made a loan of $75,000 to an interposed entity, which in turn made a loan of $75,000 to Anthony.

    The trustee of the Z Trust was taken to make a loan to Anthony. As the amount of the unpaid present entitlement is $50,000 the amount of the deemed or notional loan cannot exceed $50,000.

      Last modified: 15 Jul 2010QC 23183