07 Jun 1212 When is a private company's income tax a Div 7A 'present legal obligation'? - TD 2012/10
On 6 June 2012, the ATO issued Taxation Determination TD 2012/10 entitled "Income tax: when is income tax of a private company a 'present legal obligation' for the purposes of the distributable surplus calculation under subsection 109Y(2) of Division 7A of Part III of ITAA 1936?"
It was previously released in draft form as TD 2012/D1.
The Ruling states:
"1. If a private company has a liability to pay instalments for an income year under Part 2-10 of Schedule 1 to the Taxation Administration Act 1953 (TAA), and some or all of an instalment is unpaid as at 30 June then the unpaid amount of that instalment is a 'present legal obligation' for the purposes of the distributable surplus calculation worked out at that time.
2. If a private company which is a full self assessment taxpayer has an amount due and payable (after credits for instalments payable for the income year) 1 by reason of s 5-5(4) of the Income Tax Assessment Act 1997 (ITAA 1997), 2 then this amount is a present legal obligation for the purposes of the distributable surplus calculation worked out at 30 June of the income year which is subject to the deemed assessment under s 166A of the ITAA 1936. The fact that the tax is due on the day the return is lodged which is after the end of the year of income is not relevant for the purposes of the distributable surplus calculation.
3. If the Commissioner issues a private company with an amended assessment for any income year, then amounts payable under the amended assessment will be a present legal obligation for the purposes of the distributable surplus calculation worked out at the end of the income year subject to the amended assessment.
4. In later income years, to the extent that instalments remain unpaid and amounts payable under an assessment or amended assessment remain payable at the end of the later income year, they will be present legal obligations for the purposes of the distributable surplus calculation worked out at the end of that later year of income."