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Division 7A Working Party

Noel Beharis FTIA (Dominion Private Clients) and Tax Counsel Deepti Paton attended a meeting of the ATO's Division 7A Working Group on Tuesday 9 November 2010.

At the meeting the group discussed an issue concerning the operation of section 109XI and how the deemed present entitlement is calculated. The professional bodies put a question to the ATO about an unintended consequence that may arise on application of this section whereby payments in satisfaction of the actual unpaid present entitlement may not be taken into account in calculating the deemed present entitlement. The associations also raised the issue of the interaction between this provision and the new PS LA 2010/4.

The ATO acknowledged that its interpretation/application of section 109XI needs to be clarified and is currently undertaking further consultation with the professional bodies in order to formulate the ATO's view on this issue.
The group also discussed issues arising out of the recent finalised PS LA 2010/4. The ATO is open to feedback on difficulties that practitioners may face in applying this practice statement. Members that have concerns or comments about the practice statement are encouraged to write to Tax Policy at [].

The ATO also gave the group an updated release date of the ATO's final ruling on the application of section 109RB (the Commissioner's discretion). This ruling is now expected to be released on 8 December 2010.