Television Education Network

TEN

It is well known that Division 7A of the Income Tax Assessment Act 1936 can apply to distributions or benefits provided by a company to a shareholder or associate, or a company that has an unpaid present entitlement from a trust. What is not as well known is that the reaches of the deemed dividend rules can extend to situations where those distributions or benefits flow through interposed entities. This paper delves into how these types of situations can play out, including:

• Are the deemed dividend rules via an interposed entity self-triggering or audit initiated and what are the reporting obligations?

• What is the “reasonable person” test?

• What are the exclusions?

• When will loan repayments to a company not be taken into account as reducing the original loan?

• What is the ATO policy on triggering section 109T?

• How does the “intercompany payments and loans not treated as dividends” rule under section 109K interact with section 109T?

• In what situations may an application for the Commissioner’s discretion to disregard a deemed dividend be plausible?

This paper provides the technical background to the practical aspects discussed in the session.

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