In part two of his examination of the recent Tax Office decision to change the way that unpaid entitlements retained by family trusts are taxed, Michael Jones of Cummings Flavel McCormack, looks at what can be done to avoid penalties. (Henceforth, the ATO will treat unpaid entitlements retained for several years as loans from a company to a trust, and will tax them accordingly.) Existing unpaid entitlements will be protected if they have been disclosed and treated properly in previous accounting statements. Unpaid entitlements provided in 2010 must be dealt with by the lodegement date of the 2011 tax return, either by being paid to the company by that date, or put into a formal loan arrangement with interest paid and repayments made in the 2012 tax year. The key advice is to check with your accountant now on how your current arrangements stand and what needs to be done for the future.
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