By Ashley Muscat, Law Clerk at Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group
It is common for associates and shareholders of companies in Australia to withdraw company funds through a loan account. There are lots of tax reasons why this is a popular way to access profits from a corporate vehicle. Of course, the ATO knows this, and so if the loan is not properly documented and does not satisfy the criteria to be a Division 7A loan, the amount will be deemed to have been paid out as a dividend, and taxed in the hands of the shareholder, usually unfranked. [...]
