How Does Division 7A loan work

It's important if you borrow money from your business you know how to pay it back or if a Division 7A loan applies. There are a set of rules you MUST comply with which the ATO are enforcing. Don't do it wrong - Penalties apply.
#twelveaccounting #twelvecharteredaccountants #division7a #ato #businessowner #companies
DISCLAIMER
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

[@ryatwoi]

An excellent, concise video that needs to be on the Australian Tax Office (ATO) website under the Division 7A page.

[@AERIUX]

Hi Derek - thanks for your great explanation on Div-7A loans.
I'm looking at purchasing a business that has two Div-7A loans to a family trust that the current owner is a beneficiary of. What information can you provide on debt-forgiveness of a Div-7A loan to a Family Trust (I believe the debt-forgiveness is treated as an unfranked dividend)? As the new owner of the business, what would I need to do to correctly register the debt-forgiveness?
Hope you can give some insight on this - or do another video if you think the topic warrants it? Cheers.

[@marietirekidis1750]

You are just wonderful - Thank you!!!

[@echoztrip]

Thanks for the video. If you are using the money from the company to offset your personal mortgage, isn't this giving you a fringe benefit on the interest savings?

[@TwelveAccounting]

there can be some FBT issues and i mentioned briefly FBT at 4.09, but most of the time this can be ignored under the otherwise deductible provisions. derek

[@echoztrip]

@@TwelveAccounting Thanks Derek, I'm not even in your field but I enjoy the information regardless!

[@ashishshrestha7962]

Hi Derek, Thanks for the video. I have a query though. Say, for example, a director took a loan of $50,000 on 1 Jan 2021 and repaid it on 30 Sep 2021. He lodged his FY 21 tax return on 31 Dec 2021. Now, does the director needs to pay the interest for the loan from 1 July 2021 to 30 Sep 2021? or can we not charge any interest stating that the loan was repaid before tax lodgment date eventhough the loan was repaid after the end of financial year 2021.

[@TwelveAccounting]

no interest to worry about. derek

[@So1dier]

Thanks Derek. Could you please make a video on negative gearing, that would be much appreciated, thanks!

[@TwelveAccounting]

will do. anything in particular you would like discussed? derek