Edited version of private advice

Authorisation Number: 1052521707328

Date of advice: 24 March 2026

Ruling

Subject: Division 7A

Question 1

Will the advance of the New Loans trigger the operation of section 109D of the ITAA 1936?

Answer

No.

Question 2

Will the advance of the New Loans trigger the application of section 109R of the ITAA 1936, such that any repayments made by the Participants in respect of the Historical Loans, would be disregarded under subsection 109R(2) of the ITAA 1936?

Answer

No.

Question 3

Will the Company be taken to have paid a dividend to the Participants at the end of the income year in which the Historical Loans are repaid, pursuant to subsection 109E(1) of the ITAA 1936?

Answer

No.

This ruling applies for the following period:

XX Month to XX Month XXXX

The scheme commenced on:

XX Month XXXX

Relevant facts and circumstances

All legislative references are to the Income Tax Assessment Act 1936 unless otherwise specified.

The Company was listed on the Australian Securities Exchange (ASX) on the XX Month XXXX.

As at XX Month XXXX:

•                 In respect of the legal ownership of the shares, the top X shareholders of the Company collectively held X% of the shares, and

•                 Upon tracing through the nominee shareholders, the top X beneficial shareholders collectively hold X% of the shares,

The current market value of the shares in the Company is approximately $X.

For the income years ending XX Month XXXX to XX Month XXXX (the relevant income years) the Company will meet the requirements of a public company in section 103A.

The Board of the Company (the Board) has previously advanced loans (Historical Loans) to the Participants.

The Board have decided that in order to extinguish the Historical Loans, the Company will advance new loans to the Participants equal to the amount of the balance outstanding on their respective loan (the New Loans).

Subsequently, the Participants will apply the funds received in connection with the New Loans, to repay the balance of the Historical Loans.

The company will be listed on the ASX at all times during the relevant income years.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6-1(1)

Income Tax Assessment Act 1936 Division 7 of Part III

Income Tax Assessment Act 1936 Section 103A

Income Tax Assessment Act 1936 Subsection 103A(1)

Income Tax Assessment Act 1936 Subsection 103A(2)

Income Tax Assessment Act 1936 Subsection 103A(3)

Income Tax Assessment Act 1936 Subsection 103A(5)

Income Tax Assessment Act 1936 Section 109D

Income Tax Assessment Act 1936 Section 109E

Income Tax Assessment Act 1936 Section 109N(1)

Income Tax Assessment Act 1936 Section 109R

Reasons for decision

Question 1

Will the advance of the New Loans trigger the operation of section 109D of the ITAA 1936?

Summary

No.

Detailed reasoning

Section 109D applies to certain loans made by private companies.

Subsection 6-1(1) defines a private company, in relation to a year of income, as a company that is a private company in relation to that year of income for the purposes of Division 7 of Part III.

Subsection 103A(1) of Division 7 states:

For the purposes of this Division, a company is a private company in relation to the year of income if the company is not a public company in relation to the year of income.

Section 109D will not apply to the advance of New Loans as you will meet the requirements of a public company in section 103A.

Question 2

Will the advance of the New Loans trigger the application of section 109R of the ITAA 1936, such that any repayments made by the Participants in respect of the Historical Loans, would be disregarded under subsection 109R(2) of the ITAA 1936?

Summary

No.

Detailed reasoning

Section 109R provides for some payments to a private company in relation to a loan the private company made to an entity not to be taken into account for certain purposes of Division 7A.

As mentioned above, a company is a private company in relation to the year of income if the company is not a public company in relation to the year of income.

Accordingly, section 109R will not apply to any repayments made by the Participants in respect of the Historical Loans as they are made to you in an income year where you will meet the requirements of a public company in section 103A.

Question 3

Will the Company be taken to have paid a dividend to the Participants at the end of the income year in which the Historical Loans are repaid, pursuant to subsection 109E(1) of the ITAA 1936?

Summary

No.

Detailed reasoning

Broadly, section 109E provides that a private company will be taken to pay a dividend where there is shortfall of the minimum yearly repayment on an amalgamated loan the private company made in an earlier year.

As mentioned above, a company is a private company in relation to the year of income if the company is not a public company in relation to the year of income.

Accordingly, section 109E will not apply as you as you will meet the requirements of a public company in section 103A.