Division 7A – Have you borrowed money from your business?

Many shareholders, directors or associates from time to time receive a payment or other benefit from a private company. This payment may not be a transaction completed in the normal course of business – for example, it may not be a payment of an expense or repayment of a loan. However in many cases these payments and benefits are treated as a loans, advances, debt forgiveness or gifts. Be warned- under Division 7A these payments can be treated as an unfranked dividend for income tax purposes. This means the whole amount of the dividend may be taxed in the hands of the shareholder.

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