• What if an amount is included in assessable income under Division 7A as a result of the present entitlement of any interposed trust?

    The private company is not taken to be or to become entitled to an amount from the net income of the target trust to the extent that an amount is otherwise included in the assessable income of a shareholder, or an associate of a shareholder of the private company under Subdivision EA as a result of the present entitlement of any interposed trust.

    Example 5

    Michael is a shareholder of Bennetts Pty Ltd, which is a beneficiary of Harvey Trust. In the 2009-10 income year, Michael receives a payment from the trustee of the Wilson Trust, which is attributable to an unrealised gain. He receives this payment because of his shareholding in Bennetts Pty Ltd. Michael also receives a $2,000 non-compliant Division 7A loan from the Harvey Trust.

    Bennetts Pty Ltd is entitled to $10,000 from the net income of the Harvey Trust (the first interposed trust) and Harvey Trust is presently entitled to $10,000 from the net income of the Wilson Trust. These amounts remain unpaid.

    The loan made by the Harvey Trust to Michael will be included in Michael's assessable income under ordinary operation of Subdivision EA.

    Bennetts Pty Ltd is taken to be presently entitled to $8,000 from the Wilson Trust, which is the unpaid present entitlement of $10,000 from the Harvey Trust reduced by the $2,000 loan amount that is otherwise included in Michael's assessable income under another provision of Subdivision EA.

    Example 5 flow chart.

      Last modified: 15 Jul 2010QC 23183