Division 7A is essentially an anti-avoidance measure aimed at preventing shareholders in private companies from accessing funds in the companies and using them for their own purposes, without paying the top-up tax (the tax differential between the personal marginal tax rate and the company tax rate).
With a personal tax system based on progressive tax rates, and a lowering of the company tax rate for SME businesses, the tax differential is becoming increasingly significant. This increases the motivation for tax planning - and tax avoidance - and hence having a strong mechanism like Division 7A is key to that proper function of the tax system.
Except that Division 7A is not working how it was intended to. Division 7A is overly complex, which can lead to poor compliance levels. It also catches situations that aren’t within the intended scope of the provisions and fails to catch situations that should be caught. These failings were clearly acknowledged in the Board of Taxation report.