Using Company Assets for Private purposes? Watch Out!

Dated: December 2009

The taxation laws will be amended to treat any private use of a company asset by a shareholder or an associate as a Div 7A loan for tax purposes.

All company assets, including cars, real estate and boats, are intended to be caught by the new provisions.

The changes mean that the market rate must be charged by the company for the use of the asset. If this amount is not paid by the date the company tax return for that period is lodged, then the unpaid value of the benefit derived will be considered to be an unfranked dividend upon which tax has to be paid.

For example, a family company owns a boat, and the shareholders use the boat for private purposes for a day. To avoid being assessed as receiving an unfranked franked equal to the market rate for a day’s use of the boat, the shareholders must pay the market rate fee for their usage by the time the company lodges its tax return.

This change is proposed to take effect from 1 July 2009.