This paper discusses the recently issued Treasury Consultation Paper on the tightening of the non-commercial loan rules in Division 7A. There are some very significant issues addressed in this paper that will impact on commercial arrangements, which previously fell outside of Division 7A. Examples are used to outline the situations currently under consideration for change by Treasury and the practical implications for practitioners. The paper covers:
- use of company assets
- tax avoidance using corporate limited partnerships
- other significant technical amendments, including:
- interposed companies and trusts
- revaluation schemes
- redefining "distributable surplus"
- repayments
- non-resident companies.