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3-3 Div 7A Deemed Divs - VL
3-3 Div 7A Deemed Divs - VL
Exceptions to Div7A
1) Loans that are repaid by the earlier of actual
lodgement or due date for lodgement of co tax return
2) Loans made before 4/12/97, but if terms change
post-4/12/97 Div7A applies s109D(5)
3) Forgiven debts that have previously applied s108
to treat loan as deemed dividend
Deemed Dividends
Is the distribution by a private co?
Div 7A doesnt
apply
No
Yes
Is the distribution after 4/12/1997?
No
Yes
Other info
- Property pmts incl arms length property
value s109C
No
Yes
No
Yes
Is the transaction excluded?
Rules do not
apply
Yes
No
Is the amount greater than the cos
distributable surplus?
Dist surplus calculated as:
Assets
Less: present legal obligations
Less: specified provisions
Equals Net assets
Less: non-commercial loans
Less: paid up share value
Less: repayment of non-commerical loans
Equals Distributable surplus
*Calc according to book values s109Y(2)
Exclusions s109N
s109N : Minimum interest rate and maximum term
criteria
Yes
Div 7A Consequences
1) Dividends incl in AI of shareholder as
an unfranked dividend (s202-45)
2) Result in franking debit to cos
franking acct according to cos
benchmark franking %
3) Not subject to withholding tax if paid to
non-resident s109ZA
4) Not treated as fringe benefit s109ZB
Amalgamated loans
s109P s109Q
-meet minimum
annual repayment
FBT
1) Loan/debts forgiven
Div 7A
priority (as defined in s136(1) FBTA)
2) Pmts to SH in capacity of employee
FBT priority
3) Div7A deemed dividend is not
fringe benefit s1l36(1)(r)
4) If Div7A does not apply, need to
look at FBT consequences