ATO alert courtesy of the Australian Taxation Office;

 

Decoding Division 7A – managing loans

 

The ATO has issued guidance on how to avoid unexpected tax consequences by correctly managing the requirements of a Division 7A loan. All payments and loans that haven’t been repaid need to be placed on a complying Division 7A loan.

 

This Division 7A loan agreement must be in place before the company’s tax return lodgment date. When not managed correctly, this can result in the transfer of funds being treated as an unfranked dividend and larger than expected tax bills for clients.

 

The ATO also highlighted the most common mistakes they’re seeing and how to avoid them.

 

For more information on Division 7A dividends, visit the ATO website or contact our office at 9721 1055.

 

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