Australia

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.

All the Latest From Our Division 7A – Background Team

Accounting New Year’s Resolutions for 2021

Posted By Julie O'Reilly on 13/01/2021 04:55:57 am

It’s that time of year when everyone seems to be making New Year’s resolutions. Often personal New Year’s resolutions relate to exercise, diet, and finances.…

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Are we really “all in this together”? – Victorian State versus Federal Budget agendas

Posted By Shane Crockett on 29/11/2020 11:27:51 pm

Shortly after the October Federal Budget was handed down, I wrote an article in which I asked a simple question: “How much will the States…

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How does the 2021 Victorian Budget support Victoria’s Small and Medium sized businesses?

Posted By Jonathon Larosa on 27/11/2020 08:30:43 am

William Buck’s Business and Tax Services teams have summarised the SME business support provided for in the Victorian Government’s big spending 2021 budget, which was…

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The Victorian Budget – What it means for startup and tech companies

Posted By Dr. Rita Choueiri on 27/11/2020 08:16:03 am

As the Victorian state endeavours to get people back to work to combat the government’s COVID-19 induced recession, it has specifically directed tremendous support to…

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