Division 7A and winding up structures

Published on 01 Dec 15 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

Division 7A of the Income Tax Assessment Act 1936 (Cth) is concerned with the taxation of distributions to entities connected with a private company. This article examines in detail the rules in Div 7A as they can apply to winding up a company, the forgiveness of loans, the death of a controller and vesting of trusts. The article discusses payments by liquidators, including the extended meaning of payments, and loans by liquidators. Forgiveness of company loans is then discussed, including forgiveness that does not give rise to a dividend, transfer of property in repayment of debt, and forgiveness of loans through interposed trusts. The impact of Div 7A when a controller dies, and when trusts vest as part of winding up a group structure, is then examined. The article concludes with a description of recent recommendations of the Board of Taxation made as part of its post-implementation review of Div 7A.

Author profile

Michael Parker CTA

Michael is a Partner in the taxation section of Hall & Wilcox Lawyers. His practice focuses on tax disputes, domestic income tax issues including CGT and Division 7A, business sales, acquisitions and restructures and GST. Michael has extensive experience handling a broad range of taxpayer disputes, including disputes concerning the Small Business CGT Concessions, having acted for the taxpayers in White v FCT [2009] FCA 880, White v FCT [2012] FCA 109 and Altnot v FCT [2013] AATA 140, among other cases. Michael regularly consults to the Board of Taxation and Treasury including in respect of Division 7A, small business impediments and the small business CGT Concessions. He is a regular presenter for The Tax Institute. - Current at 06 August 2018

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