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However, the ATO's reasoning for the change, the supposed misuse of trust funds to buy yachts, cars, etc which are being used by beneficiaries, really doesn't stack up when UPEs to individuals continue to be treated as normal distributions! The sooner someone challenges this in court the...

I'm afraid this represents a fundamental misunderstanding of the difference between taxable profit and available cash. To paraphrase an earlier example, if a business operating in a trust makes a normal $100k profit in the year, but repays a bank loan of $100k, it'll have no cash available to...