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Understanding the concepts of present entitlement and realisation in subsection 109XA(1)

Published on 01 Oct 05 by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE

The new Subdiv EA of Div 7A of Pt III of the Income Tax Assessment Act 1936 replaces the old s 109UB and has significantly expanded the scope of the deemed dividend provisions that are applicable to trusts. In particular, the new payment deemed dividend rules that are contained in the new sub 109XA(1) are of practical significance to small businesses and tax practitioners. This article provides a technical analysis of two fundamental concepts that are applied in the context of sub 109XA(1). They are the concepts of present entitlement and realisation. The analysis that is presented in this article suggests these concepts are more complex than they first appear. The author submits that they must be applied in an ambulatory way to eliminate the mischief sought to be redressed by Subdiv EA and to be consistent with other income tax provisions to promote the intent of the new subdivision.

Author profile:

Norman Virgil LEE
Norman is an ATO officer currently undertaking the ATAX Master of Taxation Degree and the Chartered Accountants Program.
Current at 22 September 2005

 
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