Nevertheless, an agent may continue to name a share of a trust`s net income to a beneficiary of a private business without immediately paying that right and without recourse to Division 7A. This can be done by creating a sub-trust for the sole benefit of the beneficiary of the private enterprise or if the beneficiary of a private company agrees to charge UPE by granting the trust a loan from Division 7A. In pcG 2017/13, the ATO confirms that, when an investment option 1 is due on 30 June 2018 or before 30 June 2018, the Commissioner considers that each amount of the loan not paid at the end of the loan period is considered by the Commissioner to be a financial accommodation supply and therefore a loan from Division 7A. The ATO points out that an option 1 loan cannot switch to another investment option described in PSLA 2010/4, probably because, if allowed, the loan could be deferred indefinitely. You can repay some or all investors at any time during the duration of the investment contract. There would be no penalties for early repayment of capital. Interest should only be calculated on funds actually due on that date. HOWEVER, THE PCG 2017/13 notes that the ATO agrees: that an unpaid loan 1 taken out on Or before June 30, 2011 does not become a Division 7A loan on its seventh anniversary, provided that a 7-year contract period of Division 7A is concluded between the sub-trust and the beneficiary of the private company (for sub-trust funds) before the date on which the private company has taken out its tax return for the year of income in which the seventh anniversary occurs. The subtruse would then be required to pay interest at the reference rate and repay the principal for the duration of the Division 7A loan. The principles set out in TR 2010/3 and PS LA 2010/4 apply to COMPANIE-based UFEs, including another trust.

Therefore, if Trust A appoints income to Trust B (a trust belonging to the same family group) but does not pay the funds to Trust B, UPE is able to obtain financial back-housing and may be a loan for divisions 7A purposes, unless the conditions set out in PS LA 2010/4 are met. This is shown in Figure 1. The 2017/13 GCP defines the ATO`s compliance approach for Option 1 loans taken out on June 30, 2011 or before June 30, 2011 and maturing in 2017 and 2018.