Division 7a

Published on 14 May 99 by WESTERN AUSTRALIAN DIVISION, THE TAX INSTITUTE

Division 7A of Part III of the Income Tax Assessment Act 1936 (ITAA) contains provisions that would tax, as unfranked dividends, the amount of certain payments, loans and debts forgiven by a private company to its shareholders or their associates. The provisions generally apply from 4 December 1997. The year ending 30 June 1999 is the first full income year in which the provisions will have applied. Minimum requirements, to avoid the provisions deeming amounts to be dividends in the 1999 year, will apply for the first time. A purpose of this paper is to consider these requirements to assist affected taxpayers and their advisors to determine what needs to be done by 30 June 1999 to avoid, where possible, a dividend arising under Division 7A.

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