Topics on Division 7A (2) – Legislative background (2)

Payments and Dividends

If a private company in Australia pays money to one of its shareholders or someone related to them during the year, it's considered as if the company paid a dividend. This includes:

• Giving money directly to the shareholder or their associate.
• Adding money to the shareholder's account.
• Transferring property, like real estate, to the shareholder or their associate.
• Providing an asset for the shareholder's use, like a license or the right to use something.

The amount of this dividend is what was actually paid, but it can't exceed the company's distributable surplus. For property transfers or use, it's the fair market value minus any payment from the shareholder to the company.

Commissioner’s Discretion

The Commissioner has the power to overlook or allow a deemed dividend to be franked if it was caused by an honest mistake or accidental omission. To get relief:

1. Firstly, it must be determined if Division 7A was triggered due to an honest mistake or oversight by the recipient, the private company, or any other involved entity.

2. Then, the Commissioner considers:

3.  

   What led to the mistake or oversight.
   • Efforts made to fix it and how quickly.
   • If Division 7A was involved before and how.
   • Any other relevant factors.

Should you have any questions or need assistance, feel free to reach out to Tax Ideas Accountants & Advisers at

+61 2 83181545 or book an appointment through our live calendar.

• Topics on Division 7A (1) – Legislative background (1)
• Topics on Division 7A (3) – Case Background (1)
• Topics on Division 7A (4) – Case Background (2)
• Topics on Division 7A (5) – Case Background (3)
• Topics on Division 7A (6) – Case Background (4)
• Topics on Division 7A (7) – Case Background (5)