Private Company Rules

The ATO can potentially treat a payment or a loan by a private company to a shareholder or an associate (such as a family member) as an unfranked deemed dividend under Division 7A – unless an exemption applies or a formal loan agreement is in place requiring minimum interest and principal repayments.

There are various things a private company can do before the due date of lodgment for its 2013-14 income tax return to minimise the risk of a shareholder or an associate deriving a deemed dividend for the 2013-14 tax year. Depending on the circumstances, these strategies may include repaying a loan, declaring a dividend or entering a complying loan agreement before the return’s due date of lodgment.