Division 7A was enacted largely to overcome apparent deficiencies in the operation of section 108 of the Assessment Act. Section 108 treats as a dividend any amount paid or credited by a private company to a shareholder (or associate of a shareholder), to the extent that the amount so paid or credited represents a distribution of profits. However, the effectiveness of section 108 was often uncertain, due to problems in determining when moneys were paid or credited, whether genuine profits existed, and the intentions of the company and shareholder at the time of the distribution (ie whether a payment or distribution should be treated as a loan). Division 7A addressed those problems in the manner set out in this paper.
maintenance