(a) the entity, or an associate of the entity, carries on a business; and
(b) the entity or associate:
(i) uses; or
(ii) is granted or has a lease, licence or other right to use;
land, water or a building for the purpose of carrying on the business; and
(c) the provision of the dwelling to the entity is connected with that use or with that lease, licence or other right.
Note: For the meaning of land, see section 2B of the Acts Interpretation Act 1901.
(7) Subsection (1) does not apply to the provision of a dwelling, if:
(a) the dwelling is the main residence of the entity; and
(b) the provider of the dwelling is a private company; and
(c) the private company acquired the dwelling before 1 July 2009; and
(d) the private company would meet the conditions in section 165‑12 of the Income Tax Assessment Act 1997 (which is about the company maintaining the same owners) if, despite subsection 165‑12(1), the ownership test period were the period:
(i) starting on the start of 1 July 2009; and
(ii) ending at the time of payment, worked out under subsection (2) of this section.
(7A) Subsection (1) does not apply to the provision of a dwelling to the entity if:
(a) the dwelling is a flat or home unit that is part of a complex of 2 or more flats or home units; and
(b) the provider of the dwelling is a company that owns a legal or equitable interest in the land on which the complex is erected; and
(c) there is more than one share in the company, and each share (whether singly or as part of a parcel of shares) gives the relevant shareholder the right to occupy a flat or home unit in the complex; and
(d) each flat or home unit in the complex is covered by a share, or a parcel of shares, in the company; and
(e) the dwelling is provided to the entity because a shareholder holds such a share, or parcel of shares; and
(f) the company does not have legal or equitable interests in any assets other than legal or equitable interests in:
(i) the complex, and the land on which it is erected; and
(ii) any related land and buildings; and
(iii) any related plant, machinery, equipment, furniture or fittings; and
(iv) any assets relating to the matters mentioned in paragraph (g); and
(g) the assessable income of the company is derived predominantly from:
(i) managing and maintaining the complex (including the assets mentioned in subparagraphs (f)(i), (ii) and (iii)); and
(ii) interest and dividends relating to income derived from managing and maintaining the complex (including the assets mentioned in those subparagraphs).
(7B) Subsection (7A) does not apply in a case to which Subdivision E (about interposed entities) applies, if the company mentioned in that subsection is interposed between:
(a) a private company; and
(b) a shareholder, or an associate of a shareholder, of the private company.
(8) Section 118‑120 of the Income Tax Assessment Act 1997 (Extension to adjacent land) applies in relation to subsections (6) to (7A) of this section in the same way as it applies in relation to Subdivision 118‑B of that Act.
(9) Subsection (1) does not apply if the provision of the asset to the entity is a transfer of property to the entity.
Note: For transfers of property, see paragraph 109C(3)(c).
Value of payment
(10) Subject to subsection (11), the amount of the payment is:
(a) the amount that would have been paid for the provision of the asset by the parties dealing at arm’s length; less
(b) any consideration given for the provision of the asset by the entity.
(11) The amount of the payment is nil if the consideration given by the entity equals or exceeds the amount that would have been paid at arm’s length for the provision of the asset.
109D Loans treated as dividends
Loans treated as dividends in year of making
(1) A private company is taken to pay a dividend to an entity at the end of one of the private company’s years of income (the current year) if:
(a) the private company makes a loan to the entity during the current year; and
(b) the loan is not fully repaid before the lodgment day for the current year; and
(c) Subdivision D does not prevent the private company from being taken to pay a dividend because of the loan at the end of the current year; and
(d) either:
(i) the entity is a shareholder in the private company, or an associate of such a shareholder, when the loan is made; or
(ii) a reasonable person would conclude (having regard to all the circumstances) that the loan is made because the entity has been such a shareholder or associate at some time.
Note 1: Some repayments cannot be counted for the purpose of this subsection. See section 109R.
Note 2: A private company is treated as making a loan to a shareholder or shareholder’s associate if an interposed entity makes a loan to the shareholder or associate. See Subdivision E.
Amount of dividend
(1AA) The amount of the dividend taken under subsection (1) to have been paid is the amount of the loan that has not been repaid before the lodgment day for the current year, subject to section 109Y.
Note: Section 109Y limits the total amount of dividends taken to have been paid by a private company under this Division to the company’s distributable surplus.
Loans treated as dividends in year following that of making
(1A) A private company is taken to pay a dividend to an entity at the end of the private company’s year of income (the current year) if:
(a) the private company made a loan to the entity during the previous year of income; and
(b) it made the loan in the course of a winding‑up of the private company by a liquidator; and
(c) the loan is not fully repaid by the end of the current year; and
(d) either:
(i) the entity is a shareholder in the private company, or an associate of such a shareholder, when the loan is made; or
(ii) a reasonable person would conclude (having regard to all the circumstances) that the loan is made because the entity has been such a shareholder or associate at some time.
Subdivision D (other than section 109R) does not apply to loans covered by this subsection.
Amount of dividend
(2) The amount of the dividend taken under subsection (1A) to have been paid is the amount of the loan that has not been repaid at the end of the current year, subject to section 109Y.
Note: Section 109Y limits the total amount of dividends taken to have been paid by a private company under this Division to the company’s distributable surplus.
What is a loan?
(3) In this Division, loan includes:
(a) an advance of money; and
(b) a provision of credit or any other form of financial accommodation; and
(c) a payment of an amount for, on account of, on behalf of or at the request of, an entity, if there is an express or implied obligation to repay the amount; and
(d) a transaction (whatever its terms or form) which in substance effects a loan of money.
In which year of income is a loan made?
(4) For the purposes of this Division, a loan is made to an entity at the time the amount of the loan is paid to the entity by way of loan or anything described in subsection (3) is done in relation to the entity.
Payment converted to loan before lodgment day
(4A) If:
(a) a private company makes a payment to an entity at a time in a year of income; and
(b) the payment is converted to a loan before the end of the private company’s lodgment day for the year of income;
for the purposes of this Division, treat the events mentioned in paragraphs (a) and (b) as the private company making a loan to the entity at the time mentioned in paragraph (a).
Loans made before 4 December 1997
(5) If the terms of a loan made before 4 December 1997 are varied on or after that day by extending the term of the loan or increasing its amount, this Division applies to the loan as if it were made on the new terms when the variation occurred.
When is the lodgment day?
(6) In this Division, the lodgment day for a private company’s year of income is the earlier of:
(a) the due date for lodgment of the private company’s return of income for the year of income; and
(b) the date of lodgment of the private company’s return of income for the year of income.
Note: For the lodgment day for a private company that is a non‑resident, see section 109BC.
109E Amalgamated loan from a previous year treated as dividend if minimum repayment not made
Amalgamated loan treated as dividend in first year in which payment is less than minimum yearly repayment
(1) A private company is taken to pay a dividend to an entity at the end of one of the private company’s years of income (the current year) if:
(a) the private company made an amalgamated loan to the entity in an earlier year of income; and
(b) the amalgamated loan is not repaid at the end of the current year; and
(c) the amount (if any) paid to the private company during the current year in relation to the amalgamated loan falls short of the minimum yearly repayment of the amalgamated loan worked out under subsection (5) for the current year; and
(d) section 109Q does not apply in relation to the current year.
Note: The amalgamated loan does not give rise to a dividend for that year if the minimum yearly repayment is not made and the entity satisfies the Commissioner that treating the loan as a dividend would cause hardship. See section 109Q.
Amount of dividend
(2) The amount of the dividend is taken to be the amount of the shortfall mentioned in paragraph (1)(c), subject to section 109Y.
Note: Section 109Y limits the total amount of dividends taken to have been paid by a private company under this Division to the company’s distributable surplus.
What is an amalgamated loan?
(3) For the purposes of this Division, a private company is taken to make a loan (the amalgamated loan) to a single entity during a year of income if the private company makes one or more loans (constituent loans) to the entity during the year, each of which:
(a) is not fully repaid before the lodgment day for the year; and
(b) would cause the company to be taken under section 109D to pay a dividend to the entity at the end of the year, apart from section 109N; and
(c) has the same maximum term for the purposes of that section.
The amount of the amalgamated loan is the sum of the amounts of the constituent loans that have not been repaid before the lodgment day for the year of income in which the amalgamated loan is made.
(3A) Subsection (3B) applies if:
(a) a private company is taken to have made an amalgamated loan (the old amalgamated loan) during a year of income (the original year of income); and
(b) the maximum term of the old amalgamated loan under subsection 109N(3) was 7 years; and
(c) in a later year of income (the later year of income):
(i) a constituent loan taken account of by the old amalgamated loan becomes secured by a mortgage over real property; and
(ii) the term of the constituent loan is extended; and
(d) as a result of the mortgage, the maximum term of the constituent loan under subsection 109N(3) is 25 years; and
(e) the term of the constituent loan after the extension (including the period before the extension during which the constituent loan was in existence) does not exceed 25 years.
(3B) For the purposes of this Division in relation to the later year of income and subsequent years of income:
(a) treat the constituent loan as a new amalgamated loan that takes account of that constituent loan; and
(b) treat the new amalgamated loan as having been made just before the start of the later year of income; and
(c) treat the amount of the new amalgamated loan just before the start of the later year of income as the amount of the constituent loan that had not been repaid at that time; and
(d) unless paragraph (e) applies—reduce the amount of the old amalgamated loan just before the start of the later year of income by the amount of the new amalgamated loan at that time; and
(e) if the constituent loan was the only constituent loan taken account of by the old amalgamated loan—disregard the old amalgamated loan.
Payments in relation to constituent loans treated as payments in relation to amalgamated loan
(4) For the purposes of this Division, a payment to the private company in relation to a constituent loan in a year of income after the one in which the constituent loan was made is taken to be a payment in relation to the amalgamated loan that takes account of the constituent loan.
Minimum yearly repayment
(5) The minimum yearly repayment of an amalgamated loan for a year of income is the amount worked out using the formula in subsection (6). However, the minimum yearly repayment of an amalgamated loan for a year of income is the amount worked out under the regulations, if they provide for working it out.
Formula for minimum yearly repayment
(6) The formula for the minimum yearly repayment for a year of income is:
A formula for working out the minimum yearly repayment of an amalgamated loan for a year of income
where:
current year’s benchmark interest rate is the benchmark interest rate for the year of income for which the minimum yearly repayment is being worked out.
remaining term is the difference between:
(a) the number of years in the longest term of any of the constituent loans that the amalgamated loan takes account of; and
(b) the number of years between the end of the private company’s year of income in which the loan was made and the end of the private company’s year of income before the year of income for which the minimum yearly repayment is being worked out;
rounded up to the next higher whole number if the difference is not already a whole number.
Note: Section 109R provides that certain payments relating to a loan are not to be taken into account for the purposes of working out the minimum yearly repayment.
Benchmark interest rate used to work out how much of a payment relating to amalgamated loan is a repayment
(7) Work out the amount of an amalgamated loan repaid by the end of a year of income on the basis that interest is payable on the balance of the loan from time to time in a year of income at a rate equal to the benchmark interest rate for the year of income.
109F Forgiven debts treated as dividends
Forgiven debt treated as dividend
(1) A private company is taken to pay a dividend to an entity at the end of the private company’s year of income if all or part of a debt the entity owed the private company is forgiven in that year and either:
(a) the amount is forgiven when the entity is a shareholder in the private company, or an associate of such a shareholder; or
(b) a reasonable person would conclude (having regard to all the circumstances) that the amount is forgiven because the entity has been such a shareholder or associate at some time.
Note: In some cases forgiving a debt does not give rise to a dividend. See section 109G.
Amount of dividend
(2) The amount of the dividend equals the amount of debt forgiven, subject to section 109Y.
Note: Section 109Y limits the total amount of dividends taken to have been paid by a private company under this Division to the company’s distributable surplus.
When is a debt forgiven?
(3) An amount of a debt is forgiven for the purposes of this Division if and when the amount would be forgiven under section 245‑35 or 245‑37 of the Income Tax Assessment Act 1997, assuming the amount were a debt to which Subdivisions 245‑C to 245‑G of that Act apply.
Note: Division 245 of the Income Tax Assessment Act 1997 applies to forgiveness of certain commercial debts.
Discharge of debt by transfer of property is not forgiveness
(4) Despite subsection (3), an amount of debt is not forgiven for the purposes of this Division if the obligation to pay the amount is discharged by a payment to the creditor consisting of a transfer of property.
Note: Subsection 109C(4) explains how to work out the value of a payment consisting of a transfer of property.
Debt forgiveness by debt parking
(5) An amount of debt an entity (the debtor) owes a private company is also forgiven for the purposes of this Division if:
(a) the private company assigns the right to receive payment of the amount to another entity (the new creditor) who is either:
(i) an associate of the debtor; or
(ii) a party to an arrangement with the debtor about the assignment; and
(b) a reasonable person would conclude (having regard to all the circumstances) that the new creditor will not exercise the assigned right.
Debt forgiveness by failure to rely on obligation to pay
(6) An amount of debt an entity (the debtor) owes a private company is also forgiven for the purposes of this Division if a reasonable person would conclude (having regard to all the circumstances) that the private company will not insist on the entity paying the amount or rely on the entity’s obligation to pay the amount. (The amount is forgiven when a reasonable person would first reach that conclusion.)
Forgiveness of amalgamated loan debt
(7) If a private company forgives an amount of debt resulting from a constituent loan taken into account in working out the amount of an amalgamated loan under subsection 109E(3), the private company is taken to forgive the same amount of the debt resulting from the amalgamated loan.
This section operates on only the earliest debt forgiveness
(8) If the same debt is forgiven for the purposes of this Division at different times under different provisions of this section, this section operates on the first forgiveness only.