Division 7A Amendments

On 23 October 2018, Treasury released a consultation paper on Targeted Amendments to the Division 7A Integrity Rules.

2018-10-25

Division 7A may apply to business and investment taxpayers who use companies as part of their structures.

Whilst some of the proposed amendments were recommended by the Board of Taxation in their November 2014 report to Government, we have a number of concerns with the design of the proposals in the consultation paper which have the potential to significantly disrupt Australia businesses and private investments.

Some of the more important proposed measures include:

  1. The removal of the distributable surplus concept.  This means for example, that loans made by companies that may not have any profits could still be deemed dividends and may in some cases result in double taxation. 

  2. Existing Division 7A complying 25 year secured loans and 7 year unsecured loans are to be transitioned into the one single 10 year regime with a very limited transition period. 

  3. Requiring a full years interest to be calculated on the opening balance of the loan irrespective of any repayments during the year.

  4. Pre 1997 Loans will become Division 7A loans requiring principal and interest to be repaid annually over ten (10) years. 

  5. Period of review for the new Division 7A arrangements are to be extended to 14 years.  This is to be compared with the normal 4 years period of review for most tax matters (excluding fraud and evasion cases). 

Given the significant impact of these proposed changes, ShineWing Australia will be lodging their own submission and will also be communicating their concerns to the Accounting industry bodies.

We invite any comments and submissions from interested parties by 21 November 2018.

Our clients will be briefed on how these proposed measures will impact their financial affairs.  

To view the full report, click here.

For more information, please contact your ShineWing Australia representative.

Daren McDonald
Partner, Business & Private Client Advisory
ShineWing Australia
T +61 3 8635 1800
E [email protected]

Helen Wicker
Partner, Tax
ShineWing Australia
T +61 2 8059 6800
E [email protected]

Rosalind Myint
Partner, Tax
ShineWing Australia
T +61 2 8059 6800
E [email protected]

Simon Tucker
Partner, Tax
ShineWing Australia
T +61 3 8635 1800
E [email protected]