Division 7A - can some amount be transfered from FY 2021 Loan to FY 2022 Loan

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(Newbie)Registered Tax Professional

29 Nov 2022

An experienced tax practitioner mentioned a concept to me regarding refreshing a division 7A loan. An example of this concept is as follows:

Division 7A loan (FY 2021) balance $120,000

Minimum repayment is say $20,000

Process a journal entry to move $19,999 from 2021 division 7A loan to 2022 division 7A loan being the minimum repayment less $1 to refresh the loan.

Both 2021 and 2022 loans are to the same director.

Please advise:

Is there any basis for such reallocation of amounts between Div7A loans in the tax law?
Does the amount of $19,999 meet the criteria for a minimum repayment?

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(Taxicorn)Taxicorn

30 Nov 2022

You need expert advice if trying to game Div 7A - warning about unexpected outcomes here: https://williambuck.com/tools/be-advised/be-advised-december-2013/division-7a-4-common-errors/
See link above - Journaling from one loan to the other is not a repayment, so result = deemed dividend $ 20K

Div 7A requires extreme care and proper documentation.

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(Taxicorn)Taxicorn

30 Nov 2022

You need expert advice if trying to game Div 7A - warning about unexpected outcomes here: https://williambuck.com/tools/be-advised/be-advised-december-2013/division-7a-4-common-errors/
See link above - Journaling from one loan to the other is not a repayment, so result = deemed dividend $ 20K

Div 7A requires extreme care and proper documentation.

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(Newbie)Registered Tax Professional

1 Dec 2022

Thanks Bruce4Tax

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