Is UPE an asset or a liability?

A UPE owed to an individual is an ‘asset’ of that individual. This is because the individual can demand payment of the UPE from the trust. Often people use trusts to pass assets to the next generation without the assets passing through their personal estate.

What is UPE?

A UPE is an amount of trust income which the trustee of a trust appoints, but does not pay, to a private company beneficiary.

Is a UPE a CGT asset?

A UPE is therefore a chose in action and is a CGT asset under the CGT provisions. As the UPE is a chose in action and not a debt, the beneficiary has not paid any amount (or given any property) to acquire the CGT asset.

Is a UPE a debt?

The equitable obligation on a trustee to pay the amount of a UPE to a beneficiary is not generally a debt at law.

Is UPE an asset?

A UPE is a CGT asset. This is important for the the small business CGT concessions. A UPE is ordinarily regarded as a sub-trust carved out of the main trust for the purposes of s152-20 (TR 2015/4).

Can a UPE be forgiven?

When you forgive Family Trust UPEs there is neither income nor a taxable capital gain. They have no tax consequences. The forgiven amount ends up in the trust corpus. For the accounts, to be true and useful, the accounts should reflect this.

What is Division 7A ATO?

Division 7A is part of the Income Tax Assessment Act 1936 and is intended to prevent profits or assets being provided to shareholders or their associates tax free. A Division 7A deemed dividend is generally unfranked.

Can a trust forgive debt?

Debts are considered to be property and therefore an asset of the Creditor. They are a “legal chose in action” that can be forgiven or assigned. A family/discretionary trust may resolve to distribute certain income/capital to a beneficiary.

What is a deed of forgiveness?

A Deed of Debt Forgiveness is a document that a lender can use to forgive a borrower from making further payments on an outstanding debt. This deed ensures that all parties are clear about which debt is forgiven, and avoid doubt about outstanding debt that still requires payment.

What is a division 7A complying loan?

Division 7A applies to certain payments made by trustees to a shareholder or an associate of a shareholder of a private company where the company is presently entitled to an amount from the net income of the trust estate and the whole of that amount has not been paid by a specified date.

How many years before a debt is forgiven?

Unpaid credit card debt will drop off an individual’s credit report after 7 years, meaning late payments associated with the unpaid debt will no longer affect the person’s credit score. Unpaid credit card debt is not forgiven after 7 years, however.