Targeted Amendments to Division 7A

Targeted Amendments to Division 7 A

Late last month Treasury released a consultation paper on targeted amendments to Division 7A loans. This included a proposed 10-year loan model that would replace all existing 7 and 25-year loans.It is proposed all new loans would be transitioned to this new 10-year loan, which could cause major issues to tax payable and cashflow for all those entities with large 25-year loans currently sitting on their balance sheets.

Furthermore, all those previous pre-4 December 1997 loans which were generally outside the scope of the Division 7A rules would have to enter into a complying loan agreement by the end of the 2021 tax year. Unpaid Present Entitlements occurring after 16 December 2009 would also have to be paid to the Company or put in a complying 10-year loan.

Another interesting facet in the consultation paper was a proposed 14-year amendment period, allowing the Commissioner to amend a tax return well past the existing 4-year period generally in place now.

The Consultation paper is open for response to the 21 November 2018. More information can be found below:

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