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ATO Announces Division 7A Loan Repayment Extension Relief for Taxpayers Affected by COVID-19 — Orbitax Tax News & Alerts

The Australian Taxation Office (ATO) has issued a release announcing that, as part of their response to COVID-19, a streamlined process has been introduced for an extension of the deadline for meeting minimum yearly repayments requirements under Division 7A on loan agreements between private companies and their shareholders. Division 7A is intended to prevent profits or assets being provided to shareholders or their associates tax free, by treating certain payments or benefits as deemed dividends.

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Division 7A administrative relief for minimum yearly repayments

We have announced a streamlined process to apply for administrative relief for taxpayers affected by COVID-19 who are unable to make the minimum yearly repayments (MYR) on their Division 7A loans by the end of the lender’s 2019–20 income year.

When there is a complying loan agreement between a private company and its shareholder (or an associate of the shareholder), the borrower must typically pay the MYR by the end of the private company’s income year. The borrower needs to make these repayments to avoid being taxed on an unfranked dividend.

If you are concerned that you are unable to meet your repayments for the private company’s 2019–20 income year, you may be able to apply for an extension of time under the streamlined application process.

However, you must make up the shortfall of your MYR by 30 June 2021.

We encourage you to review information available on our website or speak to your tax professional to determine your eligibility for this support.

Find out about:

Request to extend time to make minimum yearly repayments for COVID-19 affected borrowers under section 109RD