Loans by companies – welcome relief in sight

 

Accountants call loans by companies to the shareholders and trusts as Division 7A loans. It requires corrective action to avoid being penalised.

It’s an area of tax law that clients just don’t understand. It is so incomprehensible that some four years ago the Board Of Taxation recommended a simplification of the rules.  This welcome idea was backed up and supported by a statement within the 2016 Federal Budget.

Only trouble was that Treasury released a position paper in October 2018 that is a complete 180 in the other direction with:-

  • Suddenly retrospectively penalising positions that were previously OK.
  • Greater penalties.
  • More complex rules.

And it’s all supposed to start from July 1 2019!

I have read this morning that the assistant Treasurer has stated that he and the ATO (of all people) are in line. He also said that he and Treasury are not in line with each other.

Thankfully sanity has returned. Pity though that it has taken over four months as Treasury has created great concern and panic.  Hopefully they will now go back and do what they were asked to do and formulate a simplified set of rules.

What is left to explain is how it ever came to be that Treasury took off hard 180 degrees in the opposite direction….

And why the picture of the owl?  Well they are supposed to be quite intelligent and able to turn their head back to normal after turning it 180.  Over to you Treasury…

At MRS, we will spend today planning for your success.