Loans to minimise tax bill

[mattnz]

In this article, http://www.smh.com.au/nsw/obeid-bou...coal-profits-inquiry-told-20130123-2d6km.html they discuss loans being made from trusts to minimise their tax bill.

Is anyone able to confirm if this type of activity is ok from ATO perspective?

i.e. have money sitting in a company at 30% tax rate and have a higher marginal tax rate. Can the company lend money to the individual, so that they have access to it, without paying additional tax?

Thanks,
Matt

 

[alexlee]

Division 7a will likely trip you up.

http://www.ato.gov.au/businesses/pathway.aspx?pc=001/003/075

 

[mattnz]

Thanks Alex,

Sounds like they will be in the poo with the ATO, even if they aren't proven guilty of these charges.

 

[Terry_w]

A trust has to distribute income (generally) or it is taxed at top rates. But what a trust could do is to lend some of its capital to beneficiaries. This has Div7a implications, I think, but it is different to a company lending to a member.

 

[mattnz]

Certainly seems to be getting some scrutiny now.

http://www.smh.com.au/business/obeids-trust-is-the-best-ad-for-tax-reform-20130124-2d8p9.html

http://www.smh.com.au/nsw/revealed-obeids-3m-water-stake-20130123-2d7j3.html

 

[Terry_w]

Certainly seems to be getting some scrutiny now.

http://www.smh.com.au/business/obeids-trust-is-the-best-ad-for-tax-reform-20130124-2d8p9.html

http://www.smh.com.au/nsw/revealed-obeids-3m-water-stake-20130123-2d7j3.html

Amazing article by pascoe. If they banned trusts that wouldn't make this sort of thing go away. A corrupt polli would just have another person own the asset and gift him the money - arguably a trust arrangement. Nominees, companies etc . No way around stopping people hiding things.