Did the company give loans to the partnership?
It's clear that the company loaned money to the partnership in 2011, 2012, and 2013. The loan amounts were $384,975 and $420,990 by June 30, 2012 and 2013, respectively. However, there was a disagreement about the loan amount as of June 30, 2011.
Taxpayers argued the balance was $543,825, while the Commissioner said it was $218,825. The difference of $325,000 was the same as a loan taken by the partnership from the National Australia Bank (NAB) on June 1, 2011.
Taxpayers believed this loan should be counted in 2011 because the tax office was not reviewing 2011 at that time. They claimed the NAB loan became a debt owed by the company after June 1, 2011. They argued that since the total loan amounts decreased from 2011 to 2013 and no more money was borrowed, it meant the loan was given to them in 2011 and partly repaid in 2012 and 2013.
The Commissioner disagreed, saying the NAB loan was still the partnership's debt until it was repaid. Taxpayers couldn't prove their claim with evidence. So, the Administrative Appeals Tribunal (AAT) agreed with the Commissioner. It concluded that by June 30, 2011, the company's loan to the partnership was $218,825. The total loans increased to $384,975 in 2012 and $420,993 in 2013. Since these loans were not repaid or structured properly, they were treated as dividends for the taxpayers in 2012 and 2013.
If you have any questions, feel free to contact Tax Ideas Accountants & Advisers at +61 2 83181545. You can also book an appointment through our live calendar.
- Topics on Division 7A (1) – Legislative background (1)
- Topics on Division 7A (2) – Legislative background (2)
- Topics on Division 7A (3) – Case Background (1)
- Topics on Division 7A (5) – Case Background (3)
- Topics on Division 7A (6) – Case Background (4)
- Topics on Division 7A (7) – Case Background (5)
