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Division 7A
Division 7A Pitfalls
Written by: The Tax Institute
Published: 24 Aug 2023
Division 7A Pitfalls
More than a quarter of a century ago, the tax landscape of loans made by private companies to their shareholders or associates of those shareholders (shareholders/associates) was permanently transformed. On 4 December 1997, the rules in Division 7A of Part III of the Income Tax Assessment Act 1936 (ITAA 19361) took effect. Notwithstanding the passage of time, many aspects of these complex provisions continue to confound practitioners and their clients.
This article considers some aspects of the provisions that affect the management of loans to shareholders/associates and shines a light on the widespread practice of using dividends to make minimum yearly repayments (MYRs) on Division 7A loans.
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Read time: 26 minutes
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