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Division 7A structuring: The contortionist revisited


Under the 2016 federal Budget amendments, quarantined pre-4 December 1997 loans and pre-16 December 2009 unpaid present entitlements (UPEs) may become subject to new loan rules. In addition, 30 June 2010 subsisting UPEs on a seven-year interest-only investment agreement will require principal repayment by 30 June 2018, presenting cash-flow problems for family groups that advisers must address now. This article discusses and assesses the risks of Div 7A loans, UPE compliance management and repayment planning options, and the potential impact of proposed Div 7A reforms. The author also analyses: the intersection of Div 7A deemed dividends, Div 245 debt forgiveness, Div 974 at-call loans, and s 100A reimbursement agreements on UPEs; the impact of the Board of Taxation and 2016 federal Budget proposed reforms; strategies for the management of pre-1997 loans and UPEs and pre-2009 quarantined UPEs; and strategies for repaying and restructuring loans and UPEs so that Div 7A does not apply.

Author profile

Ronald Jorgensen CTA
Ron principally consults on Commonwealth and State tax laws, tax dispute resolution and compliance enforcement. Ron specialises in trusts and trust disputes, succession and asset protection, business and investment structuring and tax sensitive commercial and property transactions. Ron is an Accredited Specialist Tax Law and member of the Tax Law Advisory Committee with the Law Institute of Victoria. He is a member of the Property and Commercial Law Committee of the Law Society of Tasmania. Ron is a Chartered Tax Advisor and member and former chair of the States Taxes Committee (Vic) of The Tax Institute. Ron was recognised by Doyle’s Guide Leading Tax Lawyer - Victoria for 2015 to 2021 and Best Lawyers for tax law - Australia 2021 and Global 2021. - Current at 16 July 2021
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