The ATO is focusing on common Division 7A mistakes and myths. 

Some of the common Division 7A myths and misconceptions flagged include: 

Shareholders who believe they can freely use company money in any way they like.

No, the company is a separate legal entity, so Division 7A may apply to any money or other benefits provided to shareholders and associates. 

Division 7A only applies to the shareholders of a private company.

No, Division 7A also applies to associates of shareholders, which is broadly defined. 

Dividends can be put in a journal entry after an income year has ended, to effectively offset any minimum yearly repayment obligation for that income year.

No, agreements and offsets must be made by the relevant deadline, which is usually 30 June.

Division 7A can be avoided if payments or loans to shareholders and their associates are made through other entities.

No, Division 7A may still apply where the private company’s shareholder or their associate is the target entity to whom the payment or loan is ultimately directed.

The interest rate that is applied on a Division 7A loan is the same every year.

No, the benchmark interest rate generally changes each year. 

Division 7A can be circumvented if the loan is temporarily repaid before the lodgement day, using the company’s money for the repayment.

No, repayments may not be taken into account where taxpayers reborrow similar or larger amounts from the company after making the repayment.