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CFL Financial location Level 9, 360 Queen Street Brisbane, QLD 4000
fax CFL Financial 07 3328 8999
phone CFL Financial 07 3328 8988
Email CFL Financial mail@cflfinancial.com.au

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Retire in style checklist™

There are a few reasons why Business Owners need a Retire In Style Checklist

If you’re a successful and Motivated business owner, and want to set yourself up for retirement, this guide would be perfect for you. My clients who follow these 3 simple steps live with comfort, security and the peace of mind that financial success brings.

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The Retirement Prosperity Guide™

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If you’re a busy Professional and you feel like you’re not building your wealth fast enough and you want smarter ways to utilise your cash flow, this guide is perfect for you. Clients who have used our strategies have the peace-of-mind knowing they have a ‘game plan’ for financial abundance.

Division 7a in detail

Posted on Apr 11, 2014 by CFL Financial

Business owners sometimes borrow money from their own company for a variety of personal and financial reasons. However, there can be an issue with tax law compliance if the proper steps are not carried out in treating the transaction correctly.

Division 7a is an integrity measure of tax legislation that comes into effect when there is a loan by a company to the business’ owners and associates, i.e. the shareholders of the company. Associates are broadly defined and can include family members and other related entities.

Specifically, this tax law covers any monetary benefits including:

-payments made to a shareholder (or associate) by a private company, including transfers or uses of property for less than market value

-loans made without specific loan agreements

-debt forgiveness

These transactions may come under the Division 7a provisions and as such are treated as assessable unfranked dividends to the shareholder or associate, and are taxed accordingly.

An assessable unfranked dividend means that there are no franking credits available to the recipient, so the franking tax offset will not apply and the recipient will have to pay tax on the dividends at the usual marginal rate.

However, there a few instances in which Division 7a will not apply:

-if the payment is made to a shareholder or associate who is also an employee of the company, than the dividend may be treated as a fringe benefit instead.

-to payments of genuine debts

-if the loan is entered into formally with a written agreement outlining minimum interest rates and maximum term criteria. However, minimum yearly re- payments of the loan are required in order to avoid the amount’s being treated as dividends arising in later years.

-payments or loans excluded by virtue of other tax provisions

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Retirement-in style

Retire in style checklist™

There are a few reasons why Business Owners need a Retire In Style Checklist

If you’re a successful and Motivated business owner, and want to set yourself up for retirement, this guide would be perfect for you. My clients who follow these 3 simple steps live with comfort, security and the peace of mind that financial success brings.

Retirement-prosperity-thumbnail

The Retirement Prosperity Guide™

Make sure you don’t miss out on the Retirement Prosperity Guide

If you’re a busy Professional and you feel like you’re not building your wealth fast enough and you want smarter ways to utilise your cash flow, this guide is perfect for you. Clients who have used our strategies have the peace-of-mind knowing they have a ‘game plan’ for financial abundance.

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Email:
Phone: 07 3328 8988
Fax: 07 3328 8999

Office Location:
Level 15, 10 Market Street,
Brisbane,
QLD 4000

Postal Address:
GPO Box 2468,
Brisbane,
QLD, 4001

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