What is Division 7A? Part 1

  • April 16, 2010
  • Tax

Division 7A: Directors LoansYou might often have heard Division 7A mentioned as a very important section of the tax Act by your accountant and always wondered by it meant.

Division 7A deals with amounts paid, lent or forgiven by a private company to certain assoicated entities (including individuals) that are treated as dividends, unless they come within some specific exclusions.

A Division 7A deemed dividend is generally taken to be paid at the end of the income year in which the amount is paid, lent or forgiven and the amount is included in the assessable income of taxpayer.

It generally applies to amounts paid, lent or forgiven on or after 4 December 1997.

The consequences of falling within Division 7A for a taxpayer can be extremely costly, and it is important that tax planning and conderation is given to the issues before the end of the year. Over this series of blogs we will discuss some of the consequences of Division 7A as well as some of the ways to avoid it.

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Part 2 – Consequences of Division 7A

This article has been prepared for the purposes of general information and guidance only. It should not be used for specific advice or used for formulating decisions under any circumstances. If you would like specific advice about your own personal circumstances please contact our office.