Post-Implementation Review

Division 7A Of Part III Of The Income Tax Assessment Act 1936

Background

On 18 May 2012, the Assistant Treasurer announced  that the Board would undertake a post-implementation review of Division 7A of Part III of the Income Tax Assessment Act 1936, which is to be completed by 30 June 2013.

Terms of Reference

The Board of Taxation has been requested to undertake a post-implementation review of Division 7A of Part III of the Income Tax Assessment Act 1936 (Division 7A).

Division 7A contains integrity provisions designed to prevent shareholders (or their associates) of private companies from inappropriately accessing the profits of those companies in the form of payments, loans or debt forgiveness transactions.  Within this context the Board should:

• examine whether Division 7A gives effect to this policy intent;
• examine whether there are any problems with the current operation of Division 7A, including its interaction with other areas of the tax law, that are producing unintended outcomes or disproportionate compliance and administration costs; and
• to the extent that there are problems, recommend options for resolving them so that, having regard to the policy intent of Division 7A and potential compliance and administration costs, the tax law operates effectively.

The Board should also examine the potential for broader reforms to Division 7A, including whether the provisions could be expressed in a clearer and simpler manner. Any reforms will need to maintain the integrity of the tax law and revenue neutral or near revenue neutral outcomes. 

The Board may wish to conduct this review in stages due to the possible interactions with the Government's update and rewrite of the trust income tax provisions.

The Treasury is to regularly inform the Board of the progress and outcomes of the update and rewrite of the trust income tax provisions, especially in relation to unpaid present entitlements.

In undertaking this review the Board should seek public submissions and consult widely.

The Board should complete its review by 30 June 2013.

Consultation process

In undertaking this review the Board proposes to consult widely and provide all stakeholders with the opportunity to participate in the review.

The Board has appointed a working group of its members comprising Mr Curt Rendall (Chairman of the Working Group), Mr Keith James and Ms Elizabeth Jameson to oversee this review.

Discussion paper

On 20 December 2012 the Board of Taxation released its Discussion Paper on the post-implementation review of Division 7A of Part III of the Income Tax Assessment Act 1936.

The Chairman of the Board of Taxation, Mr Chris Jordan AO, announced the release of the Discussion Paper [PDF 591KB][DOCX 287KB] via a press release. The Board has developed this Discussion Paper to invite submissions and facilitate stakeholder consultation on the issues raised.  The closing date for submissions is 15 February 2013.

Further information on this review can be obtained from Louise Lucas (02 6263 4346) at the Board of Taxation Secretariat.