Home Forums Business Taxation SME Section 100A and Division 7A | Awaiting the new ATO draft guidance

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    • #1885

      The ATO’s Advice under development webpage advises that new draft guidance materials on the operation of section 100A, and Division 7A of Part III, of the ITAA 1936 are expected to be issued in February.

      As we await the release of this new guidance, our latest TaxVine preamble reflects on the trail of breadcrumbs that led us to where we are now ahead of the release of the ATO’s new guidance materials.

      What are the challenges and issues you face when it comes to advising your clients on s 100A and Division 7A? Keen to read your comments.


      Robyn Jacobson, CTA
      Senior Advocate
      The Tax Institute

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    • #1889

      Div 7A compliance is often a difficult matter for agents due to the complexity of the regime and the pasted-together nature of the latticework of provisions. Clients frequently miss what should be obvious issues, due to that labyrinth of law and ATO practice (such as for the treatment of UPEs).

      s.100A adds another layer to this complexity – noting the recent ATO statements about their concerns about many private group trust arrangements. The definition of what may be an ‘ordinary family or commercial dealing’ or not is probably the sleeping giant that may step on many SME taxpayers whose dealings may be found to fall on the wrong side of this line. Times have changed since s100A was introduced, so what may now be ordinary was probably unimaginabl then – so this is an area of great uncertainty and should be handled carefully.

      Clients and other advisors whom we support are also concerned about the potential to use Pt IVA to supplement s.100A cases – such as in Guardian AIT Pty Ltd ATF Australian Investment Trust v Commissioner of Taxation [2021] FCA 1619 (noting that this is now on appeal to the Full Court).

      The forthcoming advice on both sets of issues for Div 7A and s.100A will likely be controversial in some ways and may generate further discussion about the appropriate boundaries in practice for these provisions – which may end up generating further litigation to see how the courts interpret those issues. Interesting times for practitioners and uncertain times for clients …

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    • #1927

      Section 100A was inserted by John Howard when he was Treasurer in 1979 into the 1936 Act. We now have the Guardian case which I assume has prodded the ATO to issue is Practice Guideline.

      Legislation by ATO pronouncement is hardly an appropriate way of reforming our tax system. After 43 years should not the section be completely rewritten or even withdrawn as part IVA should cover any sins that are feared under these arrangements.

      When talking about old prime ministers and their legacies, I need to mention Bob Hawke and his failed attempt to issue an Australia Card. This lead  to his promise not to use the TFN as a substitute and thus made the TFN a matter of national secrecy. So after 30 years we are still using white out to remove the TFN from documents. Can we please move with the times into the world of social media and the internet.

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