The Australian Taxation Office (ATO) has issued a new taxpayer alert (TA2024/2) on 12 December 2024 targeting arrangements designed to bypass Division 7A requirements.
The arrangements involve a profitable private company guaranteeing a loan made by a bank (or other financial institution) to a related private company with – minimal or no distributable surplus. Amounts are then loaned or paid to a shareholder or associate of a shareholder.
ATO considers the arrangements not effective and that Division 7A would apply to deem the private company that gave the guarantee to have paid an unfranked dividend. Alternatively, Part IVA of the Income Tax Assessment Act 1936 (the general anti-avoidance rule) may apply.
If you’ve entered, or are contemplating entering, into an arrangement of this type, ATO encourages you to contact them as outlined in the Taxpayer Alert. Alternatively, seek independent professional advice.
Draft Taxation Determination TD2024/D3 clarifies ATO’s view on an aspect of section 109U and documents our compliance approach.
If this is relevant to you or your clients, ATO encourages you to read the alert and draft determination and have your say. Your feedback ensures our guidance provides the clarity you need.
Visit the consultation hub to provide feedback.
Consultation period for the draft determination closes 31 January 2025.
