2 April 2019

The Government’s deferral of the start date for changes to Division 7A from 1 July 2019 to 1 July 2020, has been welcomed by the Institute of Public Accountants (IPA).

Division 7A is all about integrity measures primarily aimed at private company loans, payments and debt forgiveness to shareholders or their associates. It also extends to unpaid present entitlements (UPEs) where a private company loans funds back to a trust which has been a controversial, complex area of Division 7A tax law.

“The Consultation paper releases in October 2018 was not well received by stakeholders, particularly in its deviation in a few critical areas when compared to recommendations detailed in the 2014 Board of Tax review of Division 7A,” said IPA chief executive officer, Andrew Conway.

“We are pleased that the changes proposed in the consultation paper will be subject to further consultation with stakeholders.

“Some of the changes proposed were not business friendly and would have resulted in adverse cashflow consequences and the possibility of double taxation with the removal of the distributable surplus test.

“Another aspect is the inclusion of all UPEs including pre-1997 loans within the ambit of Division 7A requiring loan repayments and interest.

“This deferral announcement comes with a sigh of relief as it removes some of the uncertainties that practitioners faced trying to advise clients with Division 7A issues prior to 1 July 2019 deadline without any definitive legislation,” said Mr Conway.