Timeline for subsisting UPEs & Div7a (Current rules)

[Dilini Waidyanatha]

Say there was a distribution of profits from the family trust to a corporate beneficiary as at 30/06/2018. This has not been satisfied in any way & not put in a sub-trust for the sole benefit of the corporate beneficiary.

As per PS LA 2010/4, the subsisting UPE that is not held in a sub-trust for the sole benefit of the corporate beneficiary (a Section three loan) becomes a Div7a loan on trust’s 2018 income tax return lodgement day (let’s say 15/05/2019). As at 15/05/2020 (corporate beneficiary’s 2019 income tax return lodgement day), the UPE must be paid out or put under a S109N complying loan agreement to avoid a deemed dividend arising under Div7a.

1. When is the first MYR due?
2. When should interest start to accrue?

Thanks

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