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ATO Updated: Trust reimbursement agreements

The Australian Taxation Office (ATO) acknowledges there has been significant interest in its draft public advice and guidance relating to trust reimbursement agreements and unpaid present entitlements (also known as section 100A reimbursement agreements).

ATO’s Louise Clarke said “The vast majority of small businesses operating through a trust are not operating in a way that will attract section 100A. A distribution to an adult child who has a low marginal tax rate will not attract section 100A where they simply receive or enjoy the benefit of their distribution”.

“The ATO’s position is that if the beneficiary of the trust gets the benefit, 100A has no role to play. The ATO is not concerned about ordinary family trusts where the relevant family members benefit from the distributions”.

Ms. Clarke also noted, that the ATO is not concerned when profits from the family business are distributed to members of the family who work in the management of the business. And then that family member chooses to reinvest the profits in the business.

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