05 Feb 07 Division 7A, non-commercial loans and Commissioner's proposed discretionIn a press release issued on 6 December 2006, the Minister for Revenue and Assistant Treasurer, Peter Dutton, announced that amendments would be made to the integrity rules concerning distributions by private companies in Division 7A of ITAA 1936 (see 2006 TAXVINE No 47(8)(8 December 2006). As part of these proposed amendments, the Commissioner of Taxation will be provided with a discretion, applicable from 1 July 2002, to disregard a deemed dividend where there is evidence that a taxpayer has attempted to comply with Division 7A but they have made an honest mistake and efforts have been made to rectify the mistake.
The ATO has released a statement advising that until this proposed amendment is enacted, the Commissioner has no power to exercise this proposed discretion. The Tax Office also advised that it does not anticipate commencing any new compliance activity while this legislation is pending. However, the ATO indicated that it will continue with Division 7A cases where there does not appear to be inadvertent errors as contemplated by the proposed legislative changes or where the cases fall into higher risk categories.
For a copy of the ATO's administrative arrangements concerning the proposed Division 7A amendments go here