At The Tax Institute’s March 2019 National Convention, in Hobart, Mr Chris Wookey, CTA and Chartered Accountant, presented his paper, entitled: Div 7A and UPEs – the road ahead.



1 The road so far…

Presently, there are two streams of amendments to Div 7A being developed:

▪ The ‘targeted amendments’ sourced from the Board of Taxation report of 2014; and

▪ The codification of the application of Div 7A to unpaid present entitlements that was announced in the May 2018 Federal Budget.

It has been a long road for these amendments.

For nearly twelve years, practitioners thought they had a reasonable understanding of how Div 7A applied where a trust had an unpaid present entitlement (or UPE and also known as an unpaidbeneficial entitlement or UBE) in favour of a beneficiary that was a company. After all, first there wass109UB, then subdivision EA and, although from a taxpayer’s perspective those provisions’consequences were undesirable, at least they provided a level of certainty.

Then, at a presentation to the TIA on 10 February 2009, Deputy Commissioner Mark Konza publiclyrevealed what has come to be a fundamental change to the Commissioner’s administration of Div 7Aand set out in Taxation Ruling TR 2010/3 (the ruling) and the revised version of Practice Statement PSLA 2010/4 (the practice statement) released in July 2011: that unpaid present entitlements in favour of companies could factually change so that they might become loans for the purposes of Div 7A.


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