Trust amounts treated as dividends when paid to shareholders of private companies or their associates under Division 7A.
- Subdivision EA – Trust payments, loans and debt forgiveness
- Present entitlement
- Types of benefits
- Amount assessable as a dividend
It is a common practice for a trustee to distribute a share of the income of the trust in a particular year to a private company beneficiary. Division 7A can apply where the present entitlement remains unpaid (commonly referred to as unpaid present entitlement, or UPE) before the trust lodgment day for that year.
When a private company has a UPE from an associate trust, Division 7A can apply in the following situations:
- the UPE amounts to the provision of financial accommodation, which is a loan for Division 7A purposes
- the trustee makes a payment or loan to a shareholder of the private company or their associate during the year, either directly or through one or more interposed entities
- the trustee forgives a debt owing by a shareholder of the private company or their associate during the year.
A UPE of a private company may be treated as a Division 7A loan.
For more information to work out whether a UPE is a Division 7A loan refer to Division 7A – Unpaid present entitlement.