IPA welcomes Division 7A change proposals
The Institute of Public Accountants (IPA) has welcomed a Board of Tax discussion paper canvassing key changes to Division 7A of the Tax Act, claiming it will assist businesses in reinvesting their capital.
Commenting on the second discussion paper issued by the Board of Tax, IPA chief executive Andrew Conway said it took the view that protecting the progressivity of the tax system should not impede the ability of businesses to reinvest their income as working capital.
"This is particularly important for small businesses operating through trusts that have corporate beneficiaries," he said. "Facilitating reinvestment supports productivity and entrepreneurial growth and we welcome the removal of impediments to the reinvestment of business income as working capital."
Conway also noted that the discussion paper included a possible change in approach to Unpaid Present Entitlements.
"It is encouraging that the board has acknowledged that Division 7A can be a significant source of compliance costs for small businesses, even for those that comply with its provisions," he said. "In broad terms, there are a lot of positives that can be drawn from the second discussion paper. Moving away from the prescriptive and at times inflexible, non-commercial based rules is a welcome step forward."
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