Home – New Forums Money matters Director Loans to Pty Ltd structured business

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  • #966464
    Ramps
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    Can anyone give us a basic rundown or summary on director loans to a company structured as a Pty Ltd.

    – Are there any special forms needed from asic or anywhere else etc.
    – What documents are needed

    Just a simple rundown or summary would be fantastic.

    Kind Regards
    Ramps

    #1018489
    FletcherTax
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    Hi Ramps

    I sincerely recommend seeing an accountant on this one as it is not an area where you’d like to make a mistake. As companies are governed by Corps Act, much stricter rules are in play; namely Division 7A in the case your proposing.

    Make sure you have a loan agreement in place and are aware of how and when Division 7A applies.

    Fletcher Tax Accountants
    http://www.fletchertaxaccountants.com.au

    Please note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.

    #1018490
    linkman
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    Hi Ramps – I agree with Fletchers.

    This is a really, really risky area of the legislation.

    Basically Div 7a seeks to capture payments from a company to a shareholder and treat them as income in the hands of the shareholder. Many companies provide payments to their shareholders by simply transferring cash without any tax deducted – or by paying their personal expenses.

    The legislation says that (and there are a number of rules) ins summary, where these payments occur and there is no loan agreement between the parties and there is no interest charged – which must be greater than the ATO benchmark rate then these payments are deemed to be unfranked dividends and the shareholder must declare them in their tax return and pay tax.

    Now as Fletchers says this is a complex area and you should really get advice about your specific situation.

    PS there are no specific ASIC forms but there is documentation required.

    Colin

    #1018491
    accstat
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    Hi Ramps,
    Considering the loan is from a director to the company and not the other way around div 7A won’t be as tricky as if it was the other way around. However, I agree with the other posters that you should get more specific advice based on your particular situation and ensure that interest charged (if any) wont be interpreted as sheltering etc
    Best regards,
    James

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