5: 7A 58 1. Division 7A Adjustment Model 59 2. Statutory Interest Model 62 3. Distribution Model 63 PrinciplesBased Provisions 65 67 A — 68 Chapter 2: Historical overview of Policy Framework for Division 7A 68 Chapter 4: Provisions of Division 7A and problems identified in their operation 68 Chapter 5: Division 7A Reform Considerations 70 B — 72 C — 2010/4 75 D — 76 PS LA
Question 4.2 The Board seeks stakeholder views on whether in cases where Division 7A is not taken into account in Family Court orders that the appropriate remedy is for the Commissioner to exercise his discretion under section 109RB to disregard the deemed dividend or whether this issue is more appropriately addressed by ensuring a better understanding of these provisions by litigants and courts. Question 4.3 The Board seeks stakeholder comment on whether Subdivisions EA and EB appropriately balance the complexity of the tax system with protection of the revenue and other policy goals, such as progressivity, or whether it could be more appropriately replaced with another rule (for example, a rule whereby a private company’s unpaid trust entitlements were always treated as a loan or a rule that excludes all UPEs from being loans but increases the scope of Subdivisions EA and EB to other forms of benefits for shareholders or associates). Question 4.4 The seeks information and stakeholder views on: a) whether stakeholders agree with the problems raised in this or the previous chapter with regard to the operations of the provisions in Division 7A. If not, what is your view? b) are there any problems not already identified in this or the previous chapter that should be considered in the review? c) the relative prioritisation of the problems identified (high, medium or low priority). d) what solutions may be for addressing the identified problems, including how they would operate. e) whether Division 7A helps or hinders the maintenance of the integrity of the income tax system. f) whether additional integrity measures are needed. g) other improvements to the operation of the Division, including its interaction with other provisions of the Act that you would like to suggest.
C — 2010/4 As per paragraph 61, of PS LA 2010/4, the table below provides an overview of the three available investment options. Option 1 — interest only 7year loan Option 2 — interest only 10year loan Option 3 — invest in a specific income producing asset or investment Amount of the annual return Main trust to pay interest calculated at the Benchmark interest rate to the sub trust. Main to pay interest calculated at the Prescribed interest rate to the sub trust. Sub trust is entitled to receive the share of net return (for example, interest income or rental income) derived as a result of the specific asset or investment to the sub trust. Sub trust to pay annual return to the private company beneficiary by the lodgment day of the income tax return for the main trust except for the final payment of the annual return which must be paid to the private company when the investment or loan is due to be repaid. Nature of the annual return Interest. Interest. Depends on the specific asset or investment. Repayment of the funds representing the UPE (the principal) The principal must be repaid at the end of the 7 year loan. The principal must be repaid at the end of the 10 year loan. The principal must be repaid by the lodgment day of the tax return of the private company beneficiary for the year in the investment ends. Deductibility of the annual return Yes, the amount is deductible to the main trust provided that the trustee of the main trust satisfies section 81 of the ITAA 1997. Yes, the amount is deductible to the main provided that the trustee of the main trust satisfies section 81 of the ITAA 1997. No. Assessability of the annual return Yes, the amount is assessable to the private company beneficiary. Yes, the amount is assessable to the private company beneficiary. Depends on the specific asset or investment. Subtrust tax return Not required. Not required. Required.