The Reason Why Division 7A Loans Exist
Division 7A exists because if we leave money in companies to be taxed, and then we take it out without ourselves getting taxed on it, that’s generally how it happens.
So, why would you need money out of a company?
Let’s consider a scenario where all the business income goes into the company, and we have $0 taxable income at the individual level. For instance, you need to cover living expenses for the person. A mortgage needs to be paid or rent. You might buy property, make other investments, or cover any other lifestyle expenses.
So the question is, how are these expenses going to be paid?
And that’s where Division 7A aims to prevent people from simply withdrawing cash from companies at a 25% tax rate and spending it personally when they would otherwise be taxed at 47%.
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
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