Division 7A issues

If you operate your business through a company, you will need to consider any arrangements between the company and associated entities, such as shareholders and trusts, involving a loan, the forgiveness of a debt or the use of the company’s assets, to see if a deemed dividend under Division 7A might arise.

You should ensure that the required minimum yearly repayments (MYR) under complying Division 7A loans are made by 30 June. Appropriate directors’ resolutions are needed for any dividends declared by 30 June that will be ‘offset’ against a shareholder’s obligation to make the MYR.

The ATO is continuing to treat unpaid present entitlements (UPEs) of corporate beneficiaries as Division 7A loans, as it awaits the High Court’s decision on its appeal against a decision that a UPE was not a loan for the purposes of Division 7A (the Bendel case).