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14 Oct 10 Div 7A Practice Statement on UPEs - PS LA 2010/4

On 14 October 2010, the ATO issued Practice Statement PS LA 2010/4. The purpose of the Practice Statement is to provide practical guidance on the administrative aspects of Taxation Ruling TR 2010/3 (Income tax: Division 7A loans: trust entitlements) in relation to unpaid present entitlements. It finalises draft ATO Practice Statement Law Administration PS LA 3362 released on 2 June 2010.

In particular, the ATO says that the Practice Statement provides practical ways on how to follow TR 2010/3. That ruling contains the Commissioner’s view on when a private company with an unpaid present entitlement makes a loan to the trust estate which generated the entitlement, for the purposes of Division 7A of the ITAA 1936.

In media release No 2010/31, issued 14 October 2010, the Commissioner, Michael D’Ascenzo, said he is aware of the importance of this issue to businesses, particularly small businesses, which use a trust structure.

“We have given careful consideration to all feedback we received from the community and have incorporated further options to address concerns raised by tax practitioners and small businesses,” Mr D’Ascenzo said.

“This practice statement provides practical ways for businesses to work towards a compliant structure with minimal impact on their cash flow or how they operate. Where businesses have made mistakes in the past this practice statement provides several options for private companies to self-correct before 31 December 2011. Taxpayers have until 30 June 2011 to work out what to do,” the Commissioner said.


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