Division 7A: Minimum repayment relief

August 2020

The ATO has provided some administrative relief for taxpayers who are impacted by COVID-19.

Taxpayers who have been unable to make their minimum yearly repayments on their Division 7A loans by the end of the 2020 financial year have been given some relief by the ATO.

When a loan from a private company to a shareholder or their associate is placed under a complying Division 7A loan agreement this will generally prevent the full loan balance from being treated as a deemed unfranked dividend. However, a deemed dividend can arise in future years if the borrower does not make the required minimum loan repayments by year-end.

Where you have been unable to meet the minimum repayment obligations for the 2020 income year, it may be possible to apply for an extension of time to make the repayments using a streamlined application process that has been established by the ATO. However, shortfalls of the minimum yearly repayments for the 2020 income year would need to be rectified by 30 June 2021.

Where the ATO approves an application, they will advise the borrower that they will not be considered to have received an unfranked dividend in the 2020 year, subject to the shortfall being paid by 30 June 2021.

Your accountant will be able to help you to apply for the relief, complete the application form, and lodge the application. Please contact us on 02 9957 4033 for more information.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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