ATO ID 2005 298
ATO ID 2005/298 | Income Tax: Division 7A: multiple trustee loans and section 109XB
Status: May be released
Issue
Can section 109XB of the Income Tax Assessment Act 1936 (ITAA 1936) deem loans made by a trustee to different shareholders (or associates) of a beneficiary private company with unpaid present entitlements (UPEs) as an assessable amount where any loans equal to the amount of the UPE are neither repaid nor converted into a complying loan agreement by the 'lodgment day'?
Decision
Yes. Where a trustee makes loans to different shareholders (or associates) of a beneficiary private company that has a UPE, any loans neither repaid nor converted into a complying loan agreement by the 'lodgment day' may give rise to an assessable amount under section 109XB of the ITAA 1936.
Facts
- Private company is a beneficiary of a trust with a UPE of $100,000.
- Trustee made five $100,000 loans to different shareholders.
- One loan was converted into a complying loan agreement.
- Remaining four loans were not repaid or converted.
Reasons for Decision
The loan that was converted to a complying agreement does not give rise to an assessable amount. However, the other loans remain captured by s 109XB and will be deemed dividends to the extent of the private company's distributable surplus (subject to apportionment).
Source: ATO Legal Database