Commissioner of Taxation v. Prestige Motors Pty Ltd. 98 ATC 4241; 38 ATR 568, the Tribunal found that there was no reason for a beneficiary`s current right to fiduciary income to result from an act or transaction that took place as a result of a repayment agreement solely because the agreement was entered into before the trust was created. s100A (7): . an agreement. which provides for the payment of money or the transfer of goods. the provision of services or other services to a person. other than the beneficiary. In the event of a historical distribution of the trust, consultants should verify whether there is a risk that the provisions of the repayment agreement will apply. In the ATO view, an ”agreement” can include a number of steps or transactions.
An agreement is not enforceable, or even enforceable. However, agreements concluded in the context of an ordinary family or commercial business are excluded. However, an agreement concluded within the framework of an ordinary family or commercial establishment is excluded from the definition of a reimbursement agreement. The term ”agreement” is broad and includes agreements and understandings that can be informal, explicit or implicit. An agreement can include a number of steps or transactions. An agreement is not enforceable, or even enforceable. The effect of the repayment agreement is to benefit the distribution of a party other than the beneficiary (it rather benefits the agent). The refund agreement provides for the payment to the corporation of the agent`s income (implied by the repetition of each year of income and its joint control) that the corporation would pay the agent a dividend equal to an equivalent amount (less the tax paid).
The Federal Supreme Court has decided that s100A does not only apply to agreements for existing trusts. And that the section can apply to trusts created on the basis of repayment agreements. If, as part of a Division 7A loan (or an unpaid right held under the conditions described in PS LA 2010/4), the funds are recovered from the Trust and are withheld as working capital in the trust, the ATO would not consider this agreement to be a repayment agreement in the absence of other factors. To be a refund agreement, at least one of the parties to the agreement must have entered into it for purposes or purposes that have reduced a person`s income tax obligation.  www.ato.gov.au/General/Trusts/In-detail/Distributions/Trust-taxation – Repayment Agreement/ Typically, s100A is triggered when there is a ”repayment agreement” and implies that a beneficiary is currently entitled to fiduciary income when: Section 100A does not apply to the income entitlement of a minor beneficiary. . . .