Changes to Division 7A will be further delayed, as outlined in the 2019-20 Federal Budget.

This section of the Tax Act requires benefits provided by private companies to related taxpayers be taxed as dividends unless they are structured as complying loans or subject to other exemptions.

Over the years, the provisions of Division 7A have been progressively amended. The Government announced that it will defer the start date of the already proposed changes that were delivered in the 2018-19 Budget to Division 7A by one income year, from 1 July 2019 to 1 July 2020. Delaying the start date will allow additional time to further consult with stakeholders and to refine the Government’s implementation approach.

The proposed amendments include simplifying Division 7A loan rules to make it easier for taxpayers to comply, increasing the benchmark interest rate by more than 3% from housing rate to overdraft rate, and a 10-year complying loan to replace both 7 and 25-year loan terms.

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