Division 7A Income tax 2014

Review of Div 7A: What to expect

Source: Taxation In Australia Journal Article

Published Date: 1 Dec 2014


Division 7A (which is about private company distributions) of Pt III of the Income Tax Assessment Act 1936 has recently been the subject of a post-implementation review by the Board of Taxation. So far, the Board has released two discussion papers for consultation, the second of which outlines five proposed reforms to improve the operation of Div 7A. Those five proposed reforms consist of a unified set of rules based on the principle of transfers of value, a better targeted framework for calculating a company's profits, a simpler, more flexible and better targeted system of complying loans, greater flexibility for trusts that reinvest unpaid present entitlements as working capital, and a self-correcting mechanism.

This article examines selected issues considered in the second discussion paper and proposes some alternative options. The authors believe that these reforms would significantly improve the operation of Div 7A and assist both taxpayers and advisers alike.

Author Profile
Herc Koustas CTA

Author Profile
Damien Burke

Author Profile
Geljic Sanyin CTA

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Division 7A Income tax 2014

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