What factors does the Commissioner consider for exercising the discretion?
You will need to demonstrate to the Commissioner that the failure to meet the requirements of Division 7A was the result of an honest mistake or an inadvertent omission.
Once it has been established that there was an honest mistake or inadvertent omission, the Commissioner is able to decide whether or not to exercise the discretion. The Commissioner must have regard to factors specified in the legislation. The respective weighting of each factor depends on the particular circumstances of each entity requesting the exercise of the discretion.
The factors specified in the legislation are:
- the circumstances that led to the mistake or omission that caused the deemed dividend to arise
- the extent to which action had been taken and how quickly action had been taken to correct the mistake or omission
- whether Division 7A had previously operated in respect of the relevant entities and in what circumstances this had occurred, and
- any other matter that the Commissioner considers relevant.
In your request for the exercise of the discretion, you should address each of the first three factors to the extent that they are relevant to you individual circumstances. You should also include any other matters that you consider relevant, such as the amount of the dividends involved. The Commissioner may also request information that he considers relevant to the exercise of the discretion in your circumstances.