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The technical nightmare that is Div 7A

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Published on 01 Oct 15 by "THE TAX SPECIALIST" JOURNAL ARTICLE

This article argues that while a necessary structural requisite, the current self-executing anti-avoidance regime of Div 7A of Pt III of the Income Tax Assessment Act 1936 (Cth) fails small business (company and/or company/trust taxpayers) in terms of efficiency and simplicity concerns and narrowly passes on equity grounds.

The article proceeds by considering some of the specific anti-avoidance integrity rules contained in Div 7A from the prospective of a “good tax system” determined by the ideals of equity, efficiency and simplicity. The criteria of a good tax system will be explained and interaction with particular provisions relating to payments, loans and debt forgiveness outlined and analysed. The article considers changes made through or by the Tax Laws Amendment Act, the problematic application of rules relating to unpaid present entitlements to related corporate beneficiaries and the extension of Div 7A rules to trusts under Subdiv EA. The article concludes with a brief analysis of reform models put forward in the Board of Taxation’s post-implementation review of Div 7A.

Author profile

Frederick Mahar
Frederick is the Principal at FM Mahar & Associates.
Current at 1 April 2015
Click here to expand/collapse more articles by Frederick Mahar.

 

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