Can any of you remember life without Div 7A? This was back in 1980s when the company tax rate and personal tax rates were on par, and there was much less temptation for any mischief. Wouldn’t life be easier without Div 7A? As we all know, Div 7A is an anti-avoidance measure to stop taxpayers from diverting taxable income into lower taxed entities. This is namely moving anything from an individual taxpayer to a company, so 49% to 30%.
The complexities of Div 7A come with the use of discretionary trusts, since they are flow-through vehicles between individuals and companies. This comes from the complex structures of interposed entities, that can cause many to feel like they are seeking the proverbial needle in a haystack.
We then have to work out the amounts that are caught by this Div 7A net – payments, loans, debt forgiveness, use of personal assets such as a holiday house need to be fully understood.
Then we have the new taxonomy and acronyms: UPEs (and no, it’s not pronounced ooops), sub-trusts, distributable surplus – do you really know what it all means?
The ATO loves this topic, and comes up with a hit list of areas that it is going to look closely into each year – this and last year was the “washing machine” – or s100A. Do you know how this works, and how to get your clients out into the spin dry cycle?
Then finally we have the much anticipated changes to Div 7A touted for years. Like all good Australian tax reform, it takes decades and a very courageous government. The best news out of this tranche will be the ability to clean up previous Div 7A problems. As a lot of us may have experienced, we get a new client but then need to clean up the previous tax agent’s Div 7A misdemeanours. The proposed laws will allow this clean up without any fault nor foul.
Wouldn’t life be easier without Div 7A? Wouldn’t life be easier without Div 7A?
Comentarios