In Tax Tip #7 , we discussed the 17 year UPE arrangement being a combination of a 10 year sub-trust arrangement and a complying Division 7A seven (7) year arrangement. In order to prepare for any proposed changes to Division 7A, your clients should be aware of the following:
Tax Tip
The sub-trust arrangement and 17 year period are obviously beneficial.
Ensure that all UPEs are properly documented under such sub-trust arrangements so that when the proposed changes are legislated, the arrangement will convert to the proposed ten (10) year arrangement.
The risk is that if the UPEs are not properly documented, and although corrective action will likely be allowed as part of the proposed changes, it will likely be a correction of a complying Division 7A arrangement of seven (7) years and not a correction of a sub-trust arrangement.
The consequence of not having a properly documented sub-trust arrangement is that any subsisting complying Division 7A arrangements are to continue their course and do not convert to a 10 year arrangement.
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