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When is a Loan a Loan?

Published on 20 Sep 2007 | Took place at Pals on Collins, Melbourne, VIC

What is a loan and when does it happen?

A client sees a loan as an everyday transaction through a business.

A lawyer says a loan results in a debtor / creditor relationship.

The accountant says a loan is whatever you want it to be!

Recent changes to the tax law and the ATO’s announcement on corrective action make it imperative to know exactly when a transaction is properly a loan, a payment or a fiction.

In this seminar, a loan for accounting purposes was discussed and contrasted with the legal concept of a loan. The taxation implications were also analysed in detail. The ATO’s Division 7A practice statement was also discussed in the context of corrective action.

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Individual sessions

Some legal aspects of loans

Author(s):  Michael Bearman

This paper covers:

  • what is a loan at law?
  • when does a loan arise?
  • statute of limitations issues
  • when is an entity a creditor or a beneficiary?
  • can a debt loan be theft at law?
Materials from this session:

Loans - tax aspects

Author(s):  Chris WOOKEY

This paper covers:

  • recent Division 7A changes
  • issue in forgiving loans
  • strategies for solving Division 7A problems as set out in PS LA 2007/20
  • debt equity rules, SME carve-outs
  • loans as traditional securities - tax issues.
Materials from this session:

Loans - an accounting aspect

Author(s):  Craig MCCORMICK

This paper covers:

  • loans - when does a loan arise?
  • is a loan different to an amount held on trust?
  • recognising loans and distinguishing them from contributed capital
  • ensuring there are no future disputes because all transactions are properly documented
  • role of an accountant in ‘creating’ loans - where does that debit entry go?
  • latest ATO Taxation Rulings and Determinations.
Materials from this session: