The Government will act to ensure that proposed legislation currently before the Parliament will not apply to payments by private companies to shareholders in their capacity as employees. Such payments will continue to be subject to the fringe benefits tax law.
The legislation (proposed Division 7A contained in Taxation Laws Amendment Bill (No 7) 1997) implements measures announced in the 1997-98 Budget which are intended to ensure that payments, loans, or debts forgiven by a private company to shareholders (and their associates) are treated as assessable dividends if there are realised or unrealised profits in the company (unless they come within specified exclusions).
During the course of reviewing submissions from taxpayers and professional bodies on the proposed legislation it has become apparent that the proposed legislation may have some unintended consequences.
The Government will amend the proposed legislation to ensure that payments to shareholders in their capacity as employees (including the provision of mobile phones and motor vehicles) will not be subject to the new provisions and will continue to be dealt with under the FBT legislation. This amendment will also ensure that superannuation contributions by private companies on behalf of shareholders in their capacity as employees will not be treated as dividends under the proposed legislation.
The Government is currently considering the representations received on other aspects of the proposed legislation.
CANBERRA
9 March 1998
Contact:
Penny Farnsworth
Assistant Treasurers Office
Telephone: (02) 62777360
Robert Puckridge
Australian Taxation Office
Telephone: (02) 62161486