- Division 7A of the Income Tax Assessment Act 1936 prevents companies making tax-free distributions to shareholders or their associates.
- All dealings with companies have tax implications.
- Always seek expert advice if you don’t have the relevant experience.
You have acted for Fred and his late wife for many years. You know his children – Susan, Tony and Alan – and have always been impressed with their harmonious relationship. Now Fred has died and the children have come to see you about his will. Unsurprisingly, Fred left everything to the three children equally.
In the 1970s, Fred set up Blue Sky Pty Ltd. It owns a couple of country properties – ‘The Bluff’ and ‘The Grove’ – as well as a residential investment property in Sydney that Fred bought in 2010, referred to as the ‘City Place’.
Susan runs ‘The Bluff’ with her own farm next door, which she has done rent-free for years. Fred has operated ‘The Grove’ in partnership with Alan, who works part-time as a surveyor. Tony is a doctor in Sydney.