Non-commercial loans and private company transactions
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Private company transactions treated as dividends
Amounts paid, lent or forgiven by a private company to a shareholder or a shareholder's associate are generally treated as unfranked dividends assessable to the shareholder or the shareholder's associate, unless they come within specified exclusions.
An amount treated as a dividend is not subject to either withholding tax or PAYG withholding and is not a fringe benefit.
The private company may also in certain circumstances frank a dividend that is taken to be paid under Division 7A because of a family law obligation.
Payments made to a shareholder or their associate in their capacity as an employee, or as an associate of an employee of the private company, are not subject to these rules. They will be subject to the provisions of the Fringe Benefits Act 1986.
Shareholders and associates
The shareholder or associate need not be a shareholder or associate at the time the transaction occurred, as long as a reasonable person would conclude that the transaction occurred because the person was a shareholder or associate at some time.
The associates of a natural person are widely defined and include:
Last modified: 04 Mar 2016QC 27923
- a relative of the person
- a partner of the person
- a partnership in which the person is a partner
- a spouse
- a child of a partner of the person
- a trustee of a trust where the person - or another entity that is an associate of the person - benefits under the trust, and
- companies which are controlled or influenced by the person.