At the same time that the ATO released their public guidance on section 100A, the ATO updated its view regarding the treatment of unpaid present entitlements (“UPEs”) for Division 7A purposes.
In TD 2022/D1, the ATO states that distributions made to corporate beneficiaries would be treated as Division 7A loans if left unpaid.
However, in the draft determination the precise timing of the loan (and time necessary to put loan agreements in place and make the first loan repayment) was said to depend on the nature of the entitlement which would lead to needlessly complicated administration and compliance for taxpayers.
Following consultation with us, the ATO has simplified the proposed timing rules such that in almost all cases, a UPE will now be considered to give rise to the provision of financial accommodation in the income year following the conferral of the entitlement.
This final view and the ATO’s approach to public consultation is welcome and significantly simplifies compliance with Division 7A for the 2022-23 and later income years.
You can read our submission below.
You can find out more about our advocacy work on the website here.
