ATO released a guide that "debunks common myths" about Division 7A
The Australian Taxation Office (ATO) released a guide that "debunks common myths" about Division 7A to improve taxpayer understanding.
According to the ATO release, most errors it sees in the application of Division 7A are simple and often the result of "common myths" about how it works, including:
The ATO explains that Division 7A is an integrity rule that prevents private company profits from being provided to shareholders or their associates tax-free. It does not apply to payments of salary and wages, director fees, ordinary dividends or certain fringe benefits, but has broad application to other payments, loans, and benefits. When Division 7A applies, the recipient of the payment, loan or other benefit will be deemed to have been paid an unfranked dividend that will be included in their assessable income.