Company loans to shareholders under review!
The Government has released a consultation paper outlining proposed reforms to ‘simplify’ the loan agreements that are generally required when a shareholder (or their associate) borrows funds (or receives a payment) from a related company.
With this in mind, Treasury is currently looking at (amongst other things):
- simplifying the Division 7A loan rules by converting to a new 10-year model; and
- clarifying that distributions from a trust to a ‘bucket’ company that remain 'unpaid present entitlements' come within the scope of Division 7A.
At this stage of the consultation process, the Government is currently considering submissions made with respect to these proposals and it is expected that draft legislation, and further clarity, will be available early in the 2019 calendar year.
If you would like to discuss this please contact our office.