A quick thumb through of pre-budget submissions from the professional accounting and tax bodies will reveal similar calls for the government to address the operation of Division 7A, following a decision last year to further defer the start date for proposed amendments to an income year on or after legislation receives royal assent.
Draft legislation has yet to surface and no further consultations have been announced. The last word came in the form of a 2018 Treasury consultation paper that revealed a number of departures from recommendations put forward by the Board of Taxation in 2014.
Key changes proposed include a new 10-year loan model for all existing seven and 25-year loans; annual benchmark interest charged at the Reserve Bank overdraft rate; an attempt to include pre-4 December 1997 loans and unpaid present entitlements (UPEs) arising on or after 16 December 2009 within Division 7A; and extending the review period for Division 7A transactions to 14 years after the end of the income year in which the loan, payment or debt forgiveness gave rise or would have given rise to a deemed dividend.
The Institute of Public Accountants general manager of technical policy Tony Greco believes the time is ripe for the government to re-engage with the profession, arguing that the ongoing limbo places practitioners and clients in a precarious position.
The latest deferral comes after the start date was first pushed back from 1 July 2018 to 1 July 2019, and then to 1 July 2020, bringing it close to five years since the proposed amendments were first announced in the 2016–17 budget.
“The can has been kicked down the road for far too long,” Mr Greco said. “From a practitioner perspective, the uncertainty has created its own share of problems and we’re all just waiting on where this will land.”
Mr Greco has now urged the government to establish a fresh round of consultation with the profession, noting that its 2018 consultation paper had left much to be desired.
“Everyone sort of barked at that because it didn’t acknowledge the Board of Taxation’s recommendations, but it wasn’t all bad — there were some administrative concessions on trying to make this thing a little bit simpler, but the main points deviated quite substantially from the Board of Taxation,” he said.
“I think they need to go back to the table and find a way forward that appeases all parties, and there is a sensible solution in part with what the Board of Taxation has provided.
“The issue here is that COVID has come along and upset that natural process of consultation, but we need to now bridge that gap between the last consultation paper and where stakeholders believe it should land.”
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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.