Mitigating penalties on Div 7A

Introduced almost 19 years ago, Division 7A and its various exemptions apply to all private companies, their shareholders and shareholder associates across the country.  While I consider this matter an Accounting & Tax 101 function, I regularly see it applied incorrectly which is concerning when you consider the significant tax penalties it can bring. Good […]

DIVISION 7A – No obligation to repay principal on sub-trust loan

Practical Compliance Guideline (PCG) 2017/13 has been released by the ATO to deal with Division 7A UPEs under sub-trust loans which are likely to mature in the coming year. The PCG enables the conversion of a “7-year option 1 investment” sub-trust arrangement (Option 1 Loan) into a compliant loan, pursuant to section 109N of the Income Tax […]

Is your Div 7A Compliant?

Division 7A of Part III of the Income Tax Assessment Act 1936 (ITAA36) is an integrity measure that was designed to prevent companies from making tax-free distributions to shareholders or their associates. This can occur where distributions of profit are disguised as loans or other transactions. This effectively allows the shareholder or their associate to […]

Ways of thinking around Div 7A

Abstract: When a private company makes a loan to a shareholder or an associate during an income year, Div 7A of the Income Tax Assessment Act 1936 (Cth) can deem the company to have paid a dividend. The dividend is assessable to that shareholder/associate. However, no deemed dividend will arise if the loan is either repaid or placed […]