Ask Me Anything on Division 7A & UPEs

Got burning questions about Div 7A and UPEs? Bring them along to this “office hour” with our resident tax expert, Andrew Henshaw.

In this session, we cover:

1.  How would you handle a 2022 UPE that was never paid or documented?

2. Should taxpayers still rely on TD 2022/11 after the most recent Bendel decision?

3.  If the ATO doesn’t attack a UPE using Division 7A, how else can they attack it?

4.  Should we tell clients with UPEs to corporate beneficiaries to wait to lodge their tax returns this year?

5. How is the "similar" in the same or similar amount for round robin loans from private companies applied? i.e. for taxpayers borrowing money from their private company to offset home loans etc, would this likely be caught by this provision?

6.  If a Trust owns the shares in a bucket company, and the bucket company makes a loss, does the Trust need to make a family Trust election?

7. Can you clarify when a Div 7A loan Agreement must be signed for a loan made in the 2024 financial year. How do early lodgement dates, and lodgement extensions work with the implementation of a Div. 7A loan agreement?

8.  If you get a Div 7A loan agreement wrong – say signed too late, or terms wrong, or for some other reason – what is the outcome, and what do you need to do to fix it?

9.  A company pays personal expenses for a Director during the June 2025 quarter, which will be reported in the 2026 FBT return and offset by an employee contribution after that return is lodged. No Div. 7A loan agreement is in place in relation to the personal expenses. Does this create a potential Div. 7A issue at 30 June 2025, given the expenses remain unreimbursed by year-end?

10.  If a Div 7a loan is set up from the 2024 FY and the first year (2025) interest is applied and minimum repayment met, but to get rid of the div 7a loan in full, is the only option to declare it all as dividend income to the shareholder/director? Or if they have money, can the loan be fully repaid to the company? Or once it is set up as a div 7a loan, is the only exit plan a large income to the person?

11. If the company constitution includes a default loan agreement, do we still need to get a signed legal loan document?

12.  If a trust makes a company presently entitled to income on 30 June 2024 and the trust has made payments to individuals for personal purposes, what is the date when EA kicks in? How can we avoid subdivision EA?

13.  So, if a div 7a loan is deemed a dividend to an associate are the accounting entries DR Dividends & Cr Dividends paid still allowed?

14.  What are the top 3 pitfalls you see accountants do around this area?

15. Distributions happen in 2024FY to a bucket company. Should it be more advisable to get a Division 7A loan, execute it by the time 2025FY lodgements are due?

16.  Are trust distributions still a UPE if it is not paid out, even though the beneficiaries would've declared this income in their personal tax returns and paid tax on it?

Date recorded: 10 June 2025