What is the Division 7a Loan?

Рет қаралды 6,859

Күн бұрын

Пікірлер: 23

@YZsTravelAdventures 9 ай бұрын

Wow dude, learning this stuff before my CAANZ Tax Exam is helpful. The ATO and the study guides are so confusing incomparison. Thanks man for this :D

@mohdmustafakhan89 Жыл бұрын

Hi David, Your explanation of complex Div 7A rule is quite astounding. Good oratory skills. I will follow your channel for more information on Tax laws.

@DavieMach Жыл бұрын

Thank you so much :)

@agentdark64 Жыл бұрын

Hi Davie, I'll just give you a scenario. Lets say for the 2020-2021 financial year, the company received $10000 income and had $8000 in expenses, which would mean the company would pay company tax on $2000 for that year. As this company was a small business, they would pay $500 company tax leaving $1500 in the company bank account. The following year, they received no income, but paid an unfranked dividend of $1500. In the following years company tax return (2021-2022), would the income be $0 and the deduction would be $0 (section 6 of the company tax return, that is 6-C and 6-S would be 0), but you would record an unfranked dividend of $1500 (section 8-K). Is this correct?

@agentdark64 Жыл бұрын

If the director pays money into the company as a loan, say $2000 because the company starts with no money so that they can pay for initial costs like workcover and insurance and this $2000 isn't declared on the BAS as revenue and then later pays back the director the exact amount tax free $2000 (even if it does not fall in the same financial year it was paid back), is this a problem? I believe this is a at call loan right? The company is also making less than the small business carve out rules 20 million in GST or whatever it was (I think that's what makes it not taxable). There was no agreement in place.

@user-mw4go7ez9t 7 ай бұрын

If you have a company generating profits, owned by a family trust, can you provide a beneficiary a temporary loan to their mortgage offset account to reduce interest. If the money was in and out of the trust for 11mths of the financial year and not permanently distributed, but returned to the company, would it trigger a 7a or fringe benefits situation. If so, how do I get around it.

@Bizzle-yn5vb Жыл бұрын

Hi David, great video. I am curious to know if it would make sense from a tax perspective to use a Div7A loan to contribute that money into super.

@DavieMach Жыл бұрын

hmmm - interesting perspective. I cant provide too much advice on this as it depends on the situation and it may seem as financial advice!

@shareBetta Жыл бұрын

Hi David, learn a lot from your videos! but I have one question, does div7a apply to beneficiary account? does it apply when the beneficiary account balance is in debit?

@DavieMach Жыл бұрын

Are you referring to a loan from a company or trust?

@shareBetta Жыл бұрын

@@DavieMach thanks for responding David! what will happen if that is a loan from a trust to its beneficiary, somehow the year end balance is in debit, and I'm wondering whether it's legal for a beneficiary to take out the money like that. I'm aware if a shareholder does it, they might trigger div7a in a company

@DavieMach Жыл бұрын

@@shareBetta should be fine Trusts don’t have div7a issues as the tax is paid on the distribution

@tomford5705 Жыл бұрын

Great vid, bit of a basic question but as the lendor (small business lending the money), is the money that is lent out treated as an expense/liability i.e. is it tax deductible? Second question not super relevant to this video, but going from a sole trader to small business, is it correct in saying I will be taxed based on the portion of the year I am a sole trader and then once I become a small business taxed from that date?

@DavieMach Жыл бұрын

the money lent is not an expense. It is considered an asset on the balance sheet and liability for the shareholder/director. The interest is considered income for the company and expense for the shareholder/director. 2nd question - yes, I assume small business you mean company? If so make sure you setup a new company, ABN, bank accounts and registrations/insurance for the new company

@tomford5705 Жыл бұрын

@@DavieMach okay great, thanks !!

@St_Jakob3112 Жыл бұрын

sole traders can be small businesses too, depending on their revenue. You may mean changing from a sole trader (under your own ABN) to a company structure (a separate legal entity/ABN) registered by ASIC.

@agentdark64 Жыл бұрын

Hi davie, does a company pay company tax on any unfranked dividends? Let's say I have $1000 and I pay it as an unfranked dividend to a shareholder, will the company at end of financial year be required to pay company tax on the $1000 as well as the individual paying marginal tax on the $1000?

@DavieMach Жыл бұрын

the company will pay tax on its profits for the year. So yes you can get double taxed. So its important to get the timing right and get the franking credit to follow the dividend

@agentdark64 Жыл бұрын

@@DavieMach Hi, So if the company has remaining profit and is closing down (Doibg a final tax return), does this mean all the remaining money should be paid as a franked dividend?

@ruriruri03 Жыл бұрын

How do I move the money around without triggering div7a?

@DavieMach Жыл бұрын

Pay wages, dividends or fees out but then you have to pay taxes to the individual

@12345xfire Жыл бұрын

If you onlend to another company structure you may be able to avoid div7a. Just be aware that investing within another company will mean investments do not qualify for the 50% general CGT discount.

@DavieMach Жыл бұрын

@@12345xfire this is true but you you have to be careful here as you can’t withdraw the money personally in that company to company loan or you will trigger div7a. This method is mainly useful if you are planning to invest it in a company.