Miscellaneous 2023

The "matching principle" - a coherent framework to understand Division 7A

Source: The Tax Specialist Journal Article

Published Date: 1 Feb 2023

 

This article puts forward the proposition that Div 7A within Pt III of the Income Tax Assessment Act 1936 (Cth) embodies a matching principle; that is, Div 7A should only operate where there is a match between the profits of a private company and the means by which a disguised dividend can be made as specifically chosen by parliament (eg payments, loans and forgiven debts). However, this matching principle has been constantly overlooked by parliament and by the Commissioner. As a consequence, anomalies in the operation of Div 7A have proliferated, and these are demonstrated and discussed in this article. Nevertheless, in the authors' view, this matching principle is the thread running through the various provisions of Div 7A, and an appreciation of that principle will provide taxpayers and practitioners with a compass, if not a GPS, to navigate this minefield.

Author Profile
Buck Xiao CTA

Author Profile
Robert Lissauer CTA

Sorry, this is subscriber only content.

To gain access to this material and much more - Subscribe Now.

(Note: Members can access Taxation in Australia journal articles without a Tax Knowledge Exchange subscription - please log in to access).

Already a Subscriber? Login now

Already a Subscriber? Login now

Details

The material is copyright. Apart any fair dealing for the purpose of private study, research criticism or review, as permitted under the copyright Act, no part may be reproduced by any process without written permission from The Tax Institute.

Unless expressly stated, opinions are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.

The Tax Institute
(ABN 45 008 392 372 (PRV14016))

("TTI")

The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009. 

Copyright Statement

All materials provided on this site are protected by copyright and are owned by or licensed to TTI.

Except as expressly permitted by TTI or the copyright owner, any person or company who uses this site must not use, reproduce, redistribute, retransmit, publish or otherwise transfer, or commercially exploit, the materials or any information, software or other content, in whole or in part, which is available through this site.

Tags

Miscellaneous 2023

Share this page