8 November 2013

Board of Taxation Review extended

The Assistant Treasurer, Senator the Hon Arthur Sinodinos AO, today announced that the Board of Taxation (the Board) will extend its review of Division 7A of Part III of the Income Tax Assessment Act 1936 to include the broader tax framework in which private business operates.

“The Board’s examination of Division 7A highlights that complexities can arise because of the Division’s interaction with other areas of the tax code and its operation in the context of private group tax arrangements,” the Assistant Treasurer said.

The Board has canvassed three models for addressing Division 7A reform and advises that there are complexities associated with each of the options proposed.

“The Board will examine the tax implications of the way that small businesses choose to operate, giving particular consideration to areas where there may be inequitable outcomes and where the system could be simplified for the benefit of small business,” he said.

The Board will conduct the review in line with the attached amended terms of reference and provide the Government with a final report by 31 October 2014.

Extended Terms of Reference: Post Implementation Review of Division 7A

The Board of Taxation is currently undertaking a post-implementation review of Division 7A of Part III of the Income Tax Assessment Act 1936 (Division 7A).

Division 7A contains integrity provisions designed to prevent shareholders (or their associates) of private companies from inappropriately accessing the profits of those companies in the form of payments, loans or debt forgiveness transactions.

Division 7A is part of a broader tax framework in which private business structures operate. Within this context the Board should:

  • examine the broader taxation framework in which Division 7A operates including its interaction with other areas of the tax law;
  • examine whether there are any problems with the current operation of Division 7A, that are producing unintended outcomes or disproportionate compliance and administration costs; and
  • to the extent that there are problems, recommend options for resolving them so that, having regard to the policy intent of Division 7A and potential compliance and administration costs, the tax law operates effectively.

The Board’s report should take account of the revenue implications of various options and, where appropriate, suggest approaches that minimise any revenue cost.

In undertaking this review the Board should seek public submissions and consult widely.

The Board should report to the Government by 31 October 2014.