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Re: Deemed distribution - UPE

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Enthusiast

Views 507

Replies 6

Dear All,

 

Can someone pls assist me with this.

Under UPEs is this is not paid then the company should declare dividend to trust.

 

1. After this is done in the company financial receivables will be cr as no more recievable and dividends dr

   Question is, company did not receive any benefit as no one paid the receivable to company. Or does legislation require trust to pay back         loan and at the same time also pay dividend. ? How will this be accounted . pls help

 

2. Also the dividens recieved by the trust , will trustee pay tax on this ? thank u

1 ACCEPTED SOLUTION

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Best answer

Community Manager

Replies 3

Hi @Joachim,

 

Thanks for your patience.

 

Yes, it would. Check out the information on Unpaid present entitlement on our website. Under the heading A UPE may be subject to Division 7A even if not converted to an ordinary loan.

 

KylieS

6 REPLIES 6
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Community Support

Replies 5

Hi @Joachim 

 

To help you we will need more detail and will likely then need to escalate it to attempt a reply. I was unsure from your message if you are just trying to check your understanding or to clarify an actual situation.Regardless more detail will help.

 

I would understand you are referring to an unpaid present entitlement or UPE. This is a present entitlement whose payment remains outstanding . This s common around trusts. The trust earns income and allocates it to the beneficiaries. The beneficiaries do not need the cash and leave the money in the trust and so now there is an unpaid present entitlement..

 

Best if you reply using a time line relevant to your query and clearly describe the kind of legal entities involved and the actions taken hopefully that will clarify the direction of your question.

 

Kind regards

MarkA

 

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Enthusiast

Replies 4

Hi @MarkATO,

 

Thank you taking time to have a look on this.This is not in relation to an actual scenario  but I just wanted to understand how UPE work. I work on bookkeping and sometimes accounts as well.

 

For an example if a trust have an ' UPE' ( the distribution the company is entitled for the FY) towards private company beneficiary and if the trust fails to go for Div 7A loan or any other option and therefore has to incur a deemed dividend. ( company declaring a dividend to trust) , will that set off the liablity trust has towards private company ?

 

Or once such is done , does the trust still has to pay the loan back ?

 

Sorry for the confusion due to the inital query.

 

Hope this one is more clear. Thank u.

 

 

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Best answer

Community Manager

Replies 3

Hi @Joachim,

 

Thanks for your patience.

 

Yes, it would. Check out the information on Unpaid present entitlement on our website. Under the heading A UPE may be subject to Division 7A even if not converted to an ordinary loan.

 

KylieS

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Enthusiast

Replies 2

Hi @KylieATO  , thanks . But it seems I am not that good in explaining things sorry for that , so what I wanted to know was if there is an unpaid (Receivable ) UPE ( sitting in the company balance sheet as a receivable) , and if deemed dividend is declared that will set off the loan balance ( Loan cr) ,( Dividend dr). So no receivable now. But should the trust still pay the loan in cash to company. ?

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Community Manager

Replies 1

Hi @Joachim,

 

Thanks for coming back to us.

 

I checked with our technical area and they advised that we require more information to be able to give you an accurate answer.

 

Can you please contact our early engagement area who will be able to assist you.

 

KylieS

 

 

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Enthusiast

Replies 0

Thank you @KylieATO .  I will follow up the matter with the EEA.