Tax Laws Amendment (2010 Measures No. 2) Act 2010 (75 of 2010)

Schedule 1   Distributions to entities connected with a private company

Income Tax Assessment Act 1936

18   After subsection 109XA(1)

Insert:

Loan repayments

(1A) Disregard paragraph (1)(b) if:

(a) subsection (1) has previously applied because the trustee made a payment (the original transaction ) to the shareholder, or to an associate of the shareholder, during a previous year of income; and

(b) the shareholder, or an associate of the shareholder, makes a loan or loans to the trustee on or after 1 July 2009; and

(c) either:

(i) a reasonable person would conclude (having regard to all the circumstances) that at the time the original transaction took place the shareholder, or an associate of the shareholder, intended to make the loan or loans to the trustee; or

(ii) the shareholder, or an associate of the shareholder, made the loan or loans to the trustee before the time the original transaction took place and a reasonable person would conclude (having regard to all the circumstances) that the trustee obtained the loan or loans in order to make the payment; and

(d) the actual transaction is applied to repay all or a part of the loan or loans.

(1B) For the purposes of applying section 109XB in a case covered by subsections (1) and (1A) of this section, disregard section 109J (Payments discharging pecuniary obligations not treated as dividends).