Publication date: 06 Dec 06 |
Source: THE TAX INSTITUTE
Peter Moltoni, Vice-President of the Taxation Institute of Australia welcomed the Minister for Revenue and Assistant Treasurer’s announcement that the Government plans to tidy up the provisions in Division 7A of the Income Tax Assessment Act 1936.
“After meeting with the Minister earlier this year to discuss our concerns and submission on these provisions, the Taxation Institute commends the Government for acting so swiftly on a number of our recommendations to make Division 7A operate more fairly”, said Mr Moltoni.
“These provisions have operated inequitably for some time in the way private companies can make distributions to their shareholders, resulting in unexpected deemed dividends and excessive penalties. These provisions preceded tax reform and are clearly laws for another time”, he noted.
“In the past, the Commissioner has not been able to provide relief for taxpayers who have made honest mistakes in trying to comply with these complex provisions. The decision to give the Commissioner a discretion to disregard a deemed dividend in these circumstances will go a long way to restoring equity and the Government is to be commended.”
“Similarly, we welcome the Government’s decision to adopt our recommendation to stop the automatic debiting of a private company’s franking account when a deemed dividend arises. This will eliminate current penalty levels that are effectively 129% of any tax shortfall.”
“It is also clear that the Government is serious about continuing real tax reform for small business with its decision to repeal section 108. This unnecessary provision has been an issue of concern for us and is an example of how the Government is listening to the community.” Mr Moltoni concluded.
We look forward to working with the Government in further consultation to ensure that these provisions and any other technical amendments to Division 7A ultimately deliver the best outcome for small business.