The Government will ensure that benefits provided by a private company to its shareholders or their associates are taxed by tightening the rules that prevent shareholders and their associates avoiding tax on distributions and benefits they receive from private companies. The measure extends the non commercial loan rules to include payments by way of a licence or right to use real property and chattels. This reduces the scope for private companies to allow their shareholders or associates to use company assets such as real estate, cars and boats for free, or at less than their arm’s length value.
Other technical amendments will be made to strengthen Division 7A, including to ensure that corporate limited partnerships cannot be used to circumvent its operation.
The measure has effect from 1 July 2009.
For more information, see the Treasurer's media release, No 2009/67, 12 May 2009