Proposed Division 7A Changes-1 July 2020 Impending Start Date

Last year's Federal Budget stated the proposed start date for changes to Division 7A would be deferred to 1 July 2020. Treasury agreed that due to the complexity of the changes and the extensive feedback received during the initial consultation process more time was essential.

We are now just over four months out from the deferred start date and at this point no clearer on what the proposed changes may look like. Treasury's consultation closed for submissions from interested parties back in November 2018 and tax practitioners and their clients have since been left in the dark. Draft legislation has yet to be released, likewise no further consultation dates have been advised.

Recap on the Key Proposed Changes:

The key changes put forward include a new 10 year loan model for all new and existing 7 and 25 year loans; annual interest to be charged at the notably higher Reserve Bank overdraft rate; an attempt to include pre 4 December 1997 loans within Division 7A; and extending the commissioners review period for Division 7A related transactions to 14 years.

What Next?

The professional accounting and taxation bodies, have recommended further consultation be undertaken and have appealed for the government to reconsider the 1 July 2020 start date. At a minimum we need reasonable time to view and comment on the draft legislation.

We once again are waiting to see if the start date will be deferred.

In the meantime the tax affairs of privately held groups remain under ongoing uncertainty. Assuming there is appropriate consultation between now and the proposed start date, we may be required to work with you quickly to look at how to effectively hold assets in your privately owned groups in the context of the actual changes, if and when they are handed down.

To discuss the implications of the Consultation Paper's proposed changes for your family group or for further information contact your Oxygen Private Clients advisor or Alanta Butera 03 9977 2600.

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Alanta Butera
Alanta Butera 11 February 2020 BACK