Know Your Private Company Loan Arrangements Before You Lodge!

Hello Chasers,

Quite often business owners will use a company credit card to pay for personal things because of the convenience rather than using their wages. The problem is that unless these transactions are reimbursed, they will accumulate and become a loan from the company to them.

The ATO advises taxpayers that, if they or an associate take a loan from their private company, they should not forget the requirements of repaying a private company loan for income tax purposes.

Otherwise, they could find the loan treated as a Division 7A deemed dividend and included in their, or their associates’, assessable income.

Taxpayers should consider the following before lodging their private company tax return:

  • Ensure their loan is a Division 7A complying loan and make minimum yearly repayments; and
  • They can’t borrow further money or assets from the same company, directly or indirectly, to make minimum yearly repayments or repay the loan – if they do, these payments may not be considered and could result in an assessable deemed dividend.

The ATO encourages taxpayers to check their loan repayments and if they are concerned a payment will not be considered, they should speak to their registered tax adviser or contact the ATO.

Have a great day!

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