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15 Jun 1111 Unpaid present entitlements – investment agreements

The ATO reminds that unpaid present entitlements (UPE) received by a private company beneficiary from a related trust between 16 December 2009 and 30 June 2010 may be treated as a loan to which Division 7A applies. To avoid this, the trustee can hold the funds in a sub-trust for the company’s sole benefit and invest those funds into the main trust.

The investment agreement between the main trust and the sub-trust demonstrates the trustee’s decision to hold the UPE funds in a sub-trust for the company’s sole benefit. The agreement is also evidence of the investment from the sub-trust to the main trust.

Trustees must put their investment agreements in place by 30 June 2011.

For more information go here.