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Division 7A minimum yearly repayment guidance inbound

Further Division 7A assistance is set to be announced after the ATO revealed that it would take a closer look at minimum yearly loan repayments for those affected by COVID-19.

Tax&Compliance Jotham Lian 15 May 2020
— 1 minute read

An online statement by the ATO has now revealed that the commissioner “will soon be issuing further guidance” for taxpayers with minimum loan repayment obligations due for the year ended 30 June 2020.

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The indication comes after the joint bodies had called for the ATO to announce temporary relief from minimum yearly loan repayments to alleviate the cost of Division 7A loans during the COVID-19 crisis period.

The joint bodies had also requested for the commissioner to exercise his discretion under section 109Q of the Income Tax Assessment Act to ensure that where the minimum yearly repayment is not met, an amalgamated loan will not be treated as a dividend.

The online update by the ATO comes as it updates PS LA 2010/4 to reflect concessions for the lodgement of trust income tax returns for the 2018–19 year of income to 5 June 2020 as part of the commissioner’s COVID-19 response.

2018–19 company tax returns that were due on 15 May 2020 under the tax agent lodgement program have also been automatically extended to 5 June 2020.

The ATO has noted that in order to avoid Division 7A consequences for certain recipients of payments or loans made by the company during the 2018–19 income year, a company must repay in full, or place on terms that comply with section 109N; and convert a payment made by the company during that income year to a loan on terms that comply with section 109N, before the deferred lodgement date.

“If you place a loan on section 109N terms before the deferred lodgement date, the borrower will need to make their first minimum yearly repayment by 30 June 2020,” the ATO said.

Accountants Daily understands the case for further lodgement extension and deferrals continues to be brought before the commissioner.

Division 7A minimum yearly repayment guidance inbound
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Jotham Lian

Jotham Lian

Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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