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  • Division 7A and lodgment date


    As part of our response to COVID-19, the lodgment day for 2018–19 company tax returns has been extended for many companies (the ‘deferred lodgment day’):

    • Returns that were due on 15 May 2020 under the tax agent lodgment program have been automatically extended to 5 June 2020.
    • Companies may have received a later lodgment due date in response to direct requests for lodgement deferrals.

    To avoid Division 7A consequences for certain recipients of payments or loans made by the company during the 2018–19 income year, a company must take the following actions before the deferred lodgment day (or the actual date of lodgment of their 2018–19 income tax return, if earlier):

    • Repay in full, or place on terms that comply with section 109N, a loan made by the company during that income year.
    • Convert a payment made by the company during that income year to a loan on terms that comply with section 109N.

    If you place a loan on section 109N terms before the deferred lodgment date, the borrower will need to make their first minimum yearly repayment (MYR) by 30 June 2020. If the borrower is unable to make the MYR because they are affected by the COVID-19 situation, they can apply for an extension of time under a streamlined application process.

    See also:

    UPEs and sub-trusts

    The date by which trust tax returns can be lodged has been extended:

    • For tax agents, 2018–19 income tax returns for trusts can be lodged by the 5 June 2020 concessional date provided your client pays any liability by that date.
    • The lodgement dates for other trust tax returns may have been extended in response to direct requests for extensions or lodgement deferrals.

    In PSLA 2010/4 the Commissioner sets out an administrative practice for unpaid present entitlements (UPEs) of corporate beneficiaries. Under this practice the Commissioner accepts that there are no Division 7A consequences where funds representing the entitlement are placed on sub-trust for the sole benefit of that beneficiary before the lodgement date for the trust tax return. This practice is being adjusted for entitlements created in the 2018–19 income year so that the UPEs need to be placed on sub-trust by 5 June 2020, or any later lodgement date allowed by the Commissioner.

    See also:

    Last modified: 26 Jun 2020QC 62617