December 2018
MLCo • December 3, 2018
Company loans to shareholders rules under review
The Government has released a consultation paper outlining proposed reforms to 'simplify' the loan agreements that are generally required when a shareholder (or their associate) borrows funds (or receives a payment) from a related company. To avoid this, many shareholders enter into complying 'Division 7A loan agreements' (basically agreeing to repay the relevant amount within 7 years, or 25 years if the loan is secured).
With this in mind,Treasury is currently looking at (amongst other things):
- simplifying the Division 7A loan rules by converting to a new 10-year model; and
- clarifying that distributions from a trust to a 'bucket' company that remain 'unpaid present entitlements' come within the scope of Division 7A.
No changes have been effected as yet with further clarity becoming available in early 2019.
Also in this month's update:
- ATO to send text messages if bank account details incorrect
- ATO contact regarding business cars and Fringe Benefits Tax ('FBT')
- External collection agencies to enforce ATO lodgment obligations
- ATO data matching and share transactions
- Improvements to employee share schemes announced
- ATO guidance regarding 'downsizer contributions'
