Division 7A of the Income Tax Assessment Act 1936 was put in place by the Government to prevent Pty Ltd entities from making tax free distribution of profits to shareholders and / or associates.  By-in large Family Trusts in a stand alone relationship was exempt from this division.

Pty Ltd Loans

However, two recent cases:

-       Case 11/2009 [2009] AATA 726; and

-       Slade Bloodstock v FCT [2007] FCAFC 173.

Demonstrate that where there is no written evidence to demonstrate that where there are advances of money from a trust to, or for the benefit of an individual these may be treated as income rather than loan advances.

Therefore, it may be prudent depending on the circumstances of the entity groups that documentation of loans be made.

If you would like to discuss further please contact us:
McNamara and Co - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandcompany.com.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com

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