Division 7A minimum annual repayments deadline extended
Under complying Division 7A loans, borrowers must make minimum annual repayments (MARs) by 30 June. Failure to do so will ordinarily result in an unfranked deemed dividend to the borrower. The ATO has stated that an extension may be allowed if borrowers are unable make MARs by 30 June due to circumstances beyond their control as a result of COVID-19.
Affected borrowers can request an extension by completing a streamlined online application. In this application, borrowers need to confirm the shortfall amount and explain how COVID-19 has affected them such that they are unable to make repayments. If the application is approved, borrowers will not be subject to the punitive impact of Division 7A so long as the MAR is made by 30 June 2021. Further information and the form can be found on the ATO website.
Whilst this administrative concession is welcomed, it will be cold comfort to many given taxpayers would ideally require notification of the success of their application by tomorrow in order to make the decision not to make the MAR. Therefore, taxpayers will need to decide whether they ‘roll the dice’ and hope that the ATO will approve their application to defer repayment, or somehow find the cash to make repayments.