28 Feb 088 Div 7A: meaning of "because" - TD 2008/D2This draft Taxation Determination was released on 27 February 2008 for public comment by 28 March 2008. Its full title is "Income tax: Division 7A of Part III of the ITAA 1936 - what is the meaning of 'because' in the context of the expression 'because the entity has been such a shareholder or associate at some time' in relation to payments, loans and debt forgiveness with former shareholders of a private company?"
The answer given in paras 1-2 of the draft is as follows:
"1. In this context 'because' means by reason that. The reason must be a real and substantial reason for the payment, loan or forgiveness concerned, even if it is not the only reason or not the main reason for the transaction.
2. The test for determining whether the event falls within the relevant provisions of Division 7A is a reasonable person's conclusion which is an objective test requiring a weighing up of all the circumstances to determine whether the reason is real and substantial."
For a copy of TD 2008/D2, go here