Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 7A - Distributions to entities connected with a private company  

Subdivision D - Payments and loans that are not treated as dividends  

SECTION 109Q   COMMISSIONER MAY ALLOW AMALGAMATED LOAN NOT TO BE TREATED AS DIVIDEND  

109Q(1)   [When private company not deemed to pay dividend]  

A private company is not taken under section 109E to pay a dividend at the end of one of its years of income (the current year ) because of an amalgamated loan to an entity if:

(a) the amount paid to the private company by the entity in the current year in relation to the loan is less than the minimum yearly repayment of the loan for the current year worked out under subsection 109E(5) ; and

(b) the entity satisfies the Commissioner that:

(i) that amount was less than the minimum yearly repayment because of circumstances beyond the entity's control; and

(ii) the entity would suffer undue hardship if the private company were taken under section 109E to pay a dividend to the entity at the end of the current year because of the loan.

109Q(2)   [Matters considered]  

In deciding whether he or she is satisfied, the Commissioner must consider:

(a) the entity's capacity, at the end of the year of income in which the amalgamated loan was made, to repay the loan; and

(b) any circumstances that have reduced the entity's capacity to repay the loan; and

(c) whether the entity took all reasonable steps to make payments relating to the amalgamated loan during the current year equal to the minimum yearly repayment of the loan for the current year; and

(d) whether the entity has made payments relating to the loan as soon as possible after the current year equalling the difference between:

(i) the minimum yearly repayment for the current year; and

(ii) the amount of payments made during the current year relating to the loan.