Source: Taxation In Australia Journal Article
Published Date: 1 Mar 2013
When a private company makes a loan to a shareholder or an associate during an income year, Div 7A of the Income Tax Assessment Act 1936 (Cth) can deem the company to have paid a dividend. The dividend is assessable to that shareholder/associate. However, no deemed dividend will arise if the loan is either repaid or placed under a complying loan agreement before the due date for lodgment of the company’s income tax return for that year (or the actual date of lodgment, if earlier). A common way of making each year’s minimum repayment on a Div 7A loan is to set it off against a dividend of the same amount declared by the company.
This article sets out an alternative approach whereby the loan is fully repaid at the outset in the same manner, and the client borrows from the bank to pay the top-up tax arising on the dividend. This may actually leave your client better off.
Allocation of professional firm profits: part 2 - Journal 01 May 2022
Allocation of professional firm profits: part 1 - Journal 01 Apr 2022
Property Development - Change of intention and advising clients - Video 04 Nov 2021
Property development - change of intention and advising clients - Paper 04 Nov 2021
Property Development - Change of intention and advising clients - Presentation 04 Nov 2021
Property Development - Change of intention and advising clients - Audio 04 Nov 2021
Division 7A loan repayments - Journal 01 Aug 2021
Division 7A - Video 17 Jun 2021
Division 7A - Audio 17 Jun 2021
Division 7A - Presentation 17 Jun 2021
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))
The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009.
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.