Pitcher Partners has made a submission to the ATO to Draft Taxation Determination TD 2025/D2.
The Draft TD relates to the application of section 109R in Division 7A where the ATO provide their view that section 109R can apply to disregard a repayment of a Division 7A loan where the borrower obtains a new loan indirectly from the original lender. Essentially, the ATO’s view is that a notional loan (i.e. one obtained through interposed entities) can be considered to have been obtained in order to make a repayment of an earlier loan and therefore disregarded for Division 7A purposes.
We made a submission stating that we do not agree with the view as the legislation is unambiguous that section 109R applies only to disregard a repayment when a loan is obtained from the same private company that made the earlier loan.
Additionally in our submission, we seek further practical guidance as to how the ATO will make determinations as to the size of any notional loans when applying its view and suggesting that in certain situations the ATO should determine that the amount of the notional loan is nil where the arrangement is not one in which there is attempted circumvention of section 109R.
You can read our submission below
