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July 23, 2020

Division 7A relief available to SMSFs

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Katerina Sousalis
Division 7A relief available to SMSFs

The ATO has announced an extension of time to meet the minimum yearly repayment for a complying Division 7A loan for those who have been impacted by COVID-19.

The extension means a shortfall in the minimum yearly repayment won’t be treated as a deemed dividend at the end of the lenders 2019-20 income year, if the shortfall is paid within the extended time frame.

Information on how to apply can be found here.

The ATO has confirmed that SMSFs in this position will be able to use the ATO’s streamline application process to apply for an extension of time to meet the minimum yearly repayment on complying Division 7A loans.

SMSFs must make up the shortfall of the minimum repayment by 30 June 2021 to ensure the shortfall is assessed as a deemed dividend.

Beware! Payment relief terms must be similar to the conditions that commercial banks are offering in relation to real estate investment loans, in order for the ATO to accept that parties are dealing on an arm’s length basis.

More information on Division 7A relief can be found on the ATO website here.

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