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13 Jan 10 Tightening the non-commercial loan rules under Div 7A

In a media release issued on 4 January 2010, the Assistant Treasurer, Senator Nick Sherry, announced the release of draft legislation on the Government's proposed changes to the non-commercial loan rules in Div 7A of ITAA 1936. The changes were announced in the 2009-10 Budget. They will prevent private companies from allowing their shareholders to use company assets, such as holiday houses, cars and other luxury items, at prices that are less than market value. The reforms will also prevent these taxpayers accessing disguised tax-free distributions of profits.

Following taxpayer feedback, the draft legislation now includes two new rules designed specifically to provide certainty and clarity for farmers and small businesses. The rules are an "otherwise deductible rule" and a "residence exemption" for certain payments.

The Assistant Treasurer said that submissions close by 1 February 2010, to allow the introduction of the Bill early in 2010.

For a copy of the Assistant Treasurer's media release, No 2010/002, 4 January 2010, go here

For a copy of the draft legislation and explanatory memorandum, go here


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