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Are your Privates Caught?: Avoiding and Solving Division 7A Problems


Division 7A was enacted largely to overcome apparent deficiencies in the operation of section 108 of the Assessment Act. Section 108 treats as a dividend any amount paid or credited by a private company to a shareholder (or associate of a shareholder), to the extent that the amount so paid or credited represents a distribution of profits. However, the effectiveness of section 108 was often uncertain, due to problems in determining when moneys were paid or credited, whether genuine profits existed, and the intentions of the company and shareholder at the time of the distribution (ie whether a payment or distribution should be treated as a loan). Division 7A addressed those problems in the manner set out in this powerpoint presentation.

Author profiles:

Andrew Shaw CTA
Andrew is a Principal with Shaw Lawyers practising primarily in revenue and commercial law for a wide range of clients including medium and large private businesses, property developers, accountancy firms and business advisers. Andrew is the current Chair of the Taxation Institute's SA Technical Subcommittee and is also a member of the Taxation Committee of the Law Council of Australia. Current at 27 February 2007 Click here to expand/collapse more articles by Andrew SHAW.
Terence Lewis CTA
In a previous life, Terry worked for the Australian Taxation Office, in the income tax audit area. When he left the ATO in 1994 Terry became a tax manager with KPMG Peat Marwick where he developed as a specialist in tax matters relating to business enterprises. His knowledge and experience spans a broad range of tax and structuring issues relating to business enterprises, including capital gains tax, Division 7A (shareholder loans and payments), Superannuation and GST. Terry left KPMG in December 2006 to set up the chartered accounting firm Lewis Richmond, which merged with William Buck in November 2012. He is now a Director with William Buck in the Business Advisory area. Current at 10 September 2014 Click here to expand/collapse more articles by Terry LEWIS.
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