It is common for associates and shareholders of companies in Australia to withdraw company funds through a loan account. There are lots of tax reasons why this is a popular way to access profits from a corporate vehicle. Of course, the ATO knows this, and so if the loan is not properly documented and does not satisfy the criteria to be a Division 7A loan, the amount will be deemed to have been paid out as a dividend, and taxed in the hands of the shareholder, usually unfranked.

But there is another danger from Division 7A loans which shareholders need to consider, and which arises when a company is placed into external administration. When a company goes into liquidation, the liquidator has the responsibility to recover the assets of the company, including all outstanding loans. What started as a sensible tax planning strategy can sometimes end up as an asset protection nightmare.

What is a Division 7A loan?

Division 7A of the Income Tax Assessment Act 1936 (Cth) (“the Act”) sets out the parameters for private companies providing loans to their shareholders or entities. Division 7A aims to prevent profits or assets being provided to shareholders or their associates tax free. Division 7A does not just cover monetary repayments but any loan, provision of credit or advancement of money.

The elements of Division 7A

Division 7A defines associates of shareholders broadly, which includes relatives, partners, trustees and any other related companies.

Therefore, Division 7A will apply if:

1. The loan is made between the company and the shareholder or associate
2. If the loan has not fully been repaid within the given financial year the loan was made
3. If any part of the debt was forgiven

What are the conditions of a Division 7A loan?

Under Division 7A of the Act the loan must comply with the strict requirements in order for the loan to be qualifying. The following conditions include:

If the conditions are not satisfied, the Australian Taxation Office can determine that the loan is a deemed assessable dividend of the shareholder creating a tax liability for the shareholder or associate.

What happens to a Division 7A loan during liquidation?

In the liquidation process, and subject to the terms of the loan, a Division 7A loan can be called up by a liquidator. When a company is placed in liquidation, Division 7A loans are considered as an asset on the balance sheet. If the loan remains unpaid, the liquidator may take legal proceedings against the shareholder which could lead to bankruptcy or winding up.

Directors and associates should carefully consider the implications of a Division 7A loan in the face of any possible external administration. There may be steps which are possible to either repay the loan over time or to negotiate terms with the liquidator. Shareholders should also be conscious that loans may be scrutinised and examined by the liquidator as possible voidable transactions, for instance as unreasonable director-related transactions in accordance with section 588FDA of the Corporations Act 2001 (Cth).

If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:

Jeffrey Brown on (02) 9806 7446 or jeffreyb@matthewsfolbigg.com.au

Stephen Mullette on (02) 9806 7459 or stephenm@matthewsfolbigg.com.au

DISCLAIMER: This article is provided to readers for their general information and on a complimentary basis. It contains a brief summary only and should not be relied upon or used as a definitive or complete statement of the relevant law.

Liability limited by a scheme approved under Professional Standards Legislation

Enjoy all that Sydney Zoo has to offer with an exclusive event for your staff and their families! Book a family day by December 30th 2023 and receive a complimentary EXCLUSIVE reptile encounter for guests to enjoy! With a day filled with animal interactions, Ferris wheel rides and delicious food, thank your team with an unforgettable event at Sydney Zoo!

BONUS GIFT: Book your event in the month of October 2023 and receive a 10% discount as well as complimentary venue hire!

LIMITED DATES AVAILABLE! 

Contact the Sydney Zoo Events Team for more information.

I am delighted to share news of the appointment of our new General Manager, Rachel Collier, with you as our valued member of the Western Sydney Business Connection.

Rachel's arrival marks a pivotal moment for The Connection. With a proven track record of exceptional leadership, Rachel comes to us from the Health Services Union, where she managed and grew a vast membership base of 76,000 and led a dynamic team of 15 individuals.

Her extensive experience managing membership-based organisations spans over a decade, including a prominent role in a peak industry body.

What truly sets Rachel apart is her deep understanding of business challenges in our great Western Sydney region. As a resident of Western Sydney herself, she intimately comprehends the unique opportunities and hurdles that await us in this evolving landscape. Moreover, Rachel's entrepreneurial spirit shines through her prior successful management of her own SME business in the pavers, building blocks and landscaping industry.

The Board of The Connection, recognising our organisation's crucial role in the Greater Sydney business landscape, was resolute in finding the perfect fit for the General Manager position, Rachel's exceptional qualifications and unwavering dedication to fostering growth and prosperity in the community make her the ideal candidate to steer us into a thriving future.

The Board and I thank all our members for your patience while searching for the right leader. Your unwavering support has been a driving force behind our success, and we are confident that, under Rachel's guidance, we will reach even greater heights.

Rachel will officially commence her role with The Connection on 14th August 2023. I believe that you will find her vision and enthusiasm contagious. Please make yourself known to Rachel at our next event or reach out to her before that.

Below are Rachel's contact details so that you can easily connect with her:

Rachel Collier | General Manager
E: rcollier@wsbc.org.au
M: 0424 718 441

The Western Sydney Business Connection is committed to empowering businesses like yours, and with Rachel at the helm, we are confident that we will soar to new horizons.

As we embark on this exciting evolution of The Connection, thank you for being an integral part of our business community.

We look forward to introducing you to Rachel and embarking on a prosperous future hand in hand.

Best Regards,

Brendon Noney

Brendon Noney | President
Western Sydney Business Connection

The Department of Finance’s Selling to Government website provides information to support businesses understand how to participate in Australian Government procurement and contracting opportunities, including:

• Where to find opportunities to sell to the Australian Government
• What rules and processes Australian Government organisations follow when procuring goods and services
• How to respond to an approach to market
• What to expect if you are awarded a contract.

The Future Made in Australia Office, within the Department of Finance, is continuously updating the website to improve information for suppliers.

If you are interested in supplying to the Australian Government, visit sellingtogov.finance.gov.au to find out more.

Remember how fun it was wearing your jeans to school and raising money for a great local cause? This year Jeans for Genes is celebrating 30 years of fundraising for Children’s Medical Research Institute in Westmead and we want you to help us celebrate!

This Jeans for Genes Day on Friday 4th August, everyday people can help the scientists at CMRI to change the future of the 1 in 20 Australian kids living with a genetic disease or birth defect.

For 65 years, the scientists at CMRI have been doing cutting edge work and today they are finding treatments and cures for diseases including epilepsy, cystic fibrosis, cancer, devastating metabolic conditions, genetic blindness, and many more of the 6000 genetic diseases that impact kids.

We can’t find the cures without medical research, and we can’t do the research without your support.

Mum Bianca has visited the Westmead labs and was blown away by how much work is being done into conditions like cystic fibrosis which impacts her son Archer.

“My family growing up has spent so many years fundraising for Children's Medical Research Institute and to go into the labs, to see the researchers working on curing devastating genetic diseases, is just mind blowing.’’

This year there are so many more ways to fundraise for research. If you’d like to get fit, then why not try Sofa to 6km or the Skipping Challenge? If cooking is more your thing, then hold a Bake it Blue event. Of course, there is always the original favourite of Wear Jeans to your school or workplace.

We also need volunteers out on the streets of Western Sydney to collect donations and sell our merchandise so if you and your team can spare a couple of hours - we’d love your support!

To get involved or donate, visit JeansforGenes.org.au or to volunteer on our big day register here at fundraise.jeansforgenes.org.au/volunteer

Or donate to the Western Sydney Business Connection Fundraiser here

The commencement of a new financial year brings with it important changes and new rates which will apply from 1 July 2023.

NEW! National Minimum Wage (NMW)

With the NMW:

• this is applicable to employees to whom neither a Modern Award or enterprise agreement applies
• the NMW increases to become $882.80 per week or $23.23 per hour
• the increase to the NMW will come into operation on 1 July 2023
• in addition:

(a)   special NMW rates apply to employees with disabilities, junior employees, apprentices, and those on training arrangements

(b)   the minimum casual loading remains unchanged at 25%

NEW! Modern Award Increases

• minimum wages to most Modern Awards increase by 5.75% (starting on the first full pay period on or after 1 July 2023)
• absorption of wage increases into over-award payments remains permissible (subject to the terms of the relevant employment agreement and what other amounts are being absorbed into any annualised wage arrangement)
• increases to the minimum wages of junior workers, apprentices, trainees, piece workers and employees on the supported wage system will occur
• expense-related allowances in Modern Awards will increase as set out in the Modern Award (eg, by the applicable CPI index figure)
• annualised salaries will need to be reviewed to ensure they continue to properly absorb/include all relevant minimum Modern Award amounts and that they continue to meet any technical notification and reconciliation requirements applying to annualised wage arrangements in certain Modern Awards
  
  

With enterprise agreements:

• they must always meet or exceed the minimum wage of:

(a)   the relevant Modern Award (ie, the Modern Award that would have applied had the enterprise agreement not been in existence)

(b)   the NMW (ie, where a Modern Award would not apply even if the enterprise agreement was not in existence)

• thus, pay rates in enterprise agreements may need to be increased (even if the enterprise agreement has its own wage increase regime)
  
  

NEW! The Sting

Be mindful that wage increases may have flow-on effects such as increasing:

• the value of leave loading, penalty rates, overtime and superannuation contributions
• the value of accrued leave entitlements
• the cost of wage related expenses such as payroll tax and workers compensation premiums
  
  

NEW! High Income Threshold (HIT)

With the HIT:

• it increases to $167,500
• it impacts:

(a)   who can make a claim for unfair dismissal (for those not covered by a Modern Award or to whom an enterprise agreement does not apply)

(b)   the maximum amount of compensation payable in an unfair dismissal claim (which increases to $83,750)

(c)   those on a 'guarantee of annual earnings' (a Modern Award does not apply to an employee whenever this guarantee is in place provided it continues to meet the relevant legislative requirements)

NEW! Redundancy

The tax-free component of a genuine redundancy payment increases to be:

• a base amount of $11,985
• an additional amount of $5,994 for each completed year of service
  
  

NEW! Superannuation Contributions Base

With superannuation:

• the superannuation guarantee rate increases to 11.0%
• the maximum superannuation contribution base increases to $62,270 per quarter ($249,080 per annum)
• an employer is not required to make superannuation contributions on behalf of employees on earnings in excess of that maximum contribution base

Questions/Assistance

If you have any questions about the above or would like any other employment related assistance, please contact our Matthews Folbigg Workplace Solutions employment law team.

DISCLAIMER: This article is provided to readers for their general information and on a complimentary basis. It contains a brief summary only and should not be relied upon or used as a definitive or complete statement of the relevant law.

Liability limited by a scheme approved under Professional Standards Legislation

Are you a leader or manager seeking to sharpen your skills, inspire your team, and drive unparalleled performance?

If so, we invite you to register for our World Class Teams Microlearning Series. This is a power packed learning opportunity that offers practical, actionable insights for managers and leaders like you. The series is delivered live and interactively via Zoom, which means you can join us from anywhere.

Here's a sneak peek at some of our upcoming sessions:

• How to Deal with Demanding Customers Who Are Not Always Right
• The Productivity Killer - How to Beat Procrastination Once and For All!
• Building Trust in Your Team: Delegating Tasks with Confidence
• Mastering 1:1 Meetings: Make Them Worthwhile & Not a Box Ticking Exercise
• 5 Steps to Overcoming Employee's Resistance to Change
• Master Presenting: Overcome Your Fear and Speak with Influence and Impact

Each micro-learning runs for a total of 60 minutes, and includes:

• A 45-minute live-streamed workshop where Diana Tapp, Australia’s #1 High Performance Team Consultant, will share the strategies that have helped countless teams reach their full potential.
• A 15-minute live Q&A, where you can ask Diana any burning questions you may have.
• A printable Action Pack with tools, techniques, and templates that makes it easy to apply what you've learned.
• Plus, we offer you 30-day access to a recording of the session so you can revisit the materials whenever you need to.

Tickets are available for only $87, a very small investment compared to the value you will gain.

Diana Tapp, CEO of World Class Teams and the author of "Unleash Your Team's Potential", will be your facilitator and guide on this journey. Brodie Collins, Group Head of Strategy at MONDIALE VGL, remarked, "The tools & techniques Di gave us worked! Di is intelligent, experienced, inspiring, influential and so much more."

We guarantee these sessions will provide you with the tools and strategies to elevate your leadership skills and drive your team's success.

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We look forward to seeing you there.

With the end of the financial year, been and gone, Metallum has had some time to reflect on the year we've had and how our business has expanded in this time. Over the last 12 months, we have kept in constant contact with our valued customers and have reached more new customers than ever before. From this, we have been focusing on increasing our brand awareness, to help our customer audience to understand and become comfortable with our products and the services we offer. Marketing for Metallum, has been a priority to increase our brand awareness by contributing to the community, sharing our stories and content about our business and what we do.

Another business development for Metallum, has been the expansion of our manufactory capacity and securing another factory. Our new factory is extensive, with more space, dual access, overhead crane facilities to accommodate immediate customer demands and also anticipated future demands. Furthermore, this allows us the opportunity to produce more products, store more materials, allow additional space for new equipment and to deliver long lasting benefits to our business.

For more information on Metallum or to connect with us, head over to our Facebook, Instagram and Linkedin pages and say hello or give us a follow!

Ronald McDonald House Charities Westmead has an exclusive opportunity for CEOs, Senior Managers, Directors and Board Members. We invite you to join us in October 2023 for CEO Walk In My Shoes. CEO Walk in My Shoes is an immersive overnight experience that will take place from Thursday, the 26th, until Friday 27th of October, 2023. All participants will have the opportunity to see first-hand what it takes to create the best possible experience for families with seriously ill or injured children, staying at our House in Greater Western Sydney ❤️

This unique experience has limited places. Inaugural CEO Walk In My Shoes participant, Jarrod Rice from Cook’s Plumbing Supplies said the following of his experience: "What will stick with me forever is the gratitude that the families have for those who are helping them in - quite often - the worst circumstance any of us could imagine. Their positivity and brightness create an environment in the House that is difficult to describe. The children pull so much strength from those around them, so this positivity is an essential part of what the House has created for the families. To play even a tiny part in giving them something to enjoy or look forward to was truly a life-changing experience".

To find out more and to register for CEO Walk In My Shoes, head to RMHC : Greater Western Sydney Chapter (ceowalkinmyshoes.org.au) or contact Senior Partnerships Manager: Matthew Mifsud via matthew.mifsud@rmhc.org.au

From 6 June 2023, important changes took effect which introduced new obligations for employers when handling flexible working arrangements requests and expanded the circumstances in which employees may make such requests.

Who can make a request for flexible working arrangements?

In essence, certain categories of employees who have completed at least 12 months’ continuous service with their employer are eligible to make a statutory request for flexible working arrangements.

What types of requests can be made?

The most common requests relate to amending days/hours of work, start/finish times and to working from home, albeit the legislation does not limit the types of changes that can be requested.

How does an employee make a request?

Employees making a statutory flexible working arrangements request must do so in writing, it must relate to their circumstances, and it must meet the requirements of the legislation.

An employee may also have an entitlement to make a flexible working arrangements request under their employment contract, an applicable modern award or enterprise agreement, or an employer policy.

Can an employer refuse an employee’s request?

A statutory request can only be refused on “reasonable business grounds” including if it would be too costly, create significant adverse impacts or be impractical to implement in the workplace.

What are the changes?

The categories of employees who can make a statutory request for flexible working arrangements now include an employee who is pregnant, an employee (or a member of their immediate family) experiencing family and domestic violence, and those returning to work after giving birth or adopting a child.

In addition to other requirements, employers must:

• discuss the request and make genuine attempts to reach agreement with the employee, including by advising of alternative arrangements they could accommodate in order to address the employee’s circumstances before refusing such requests
• provide detailed reasons for refusing the request and consider the consequences for the employee as a result of doing so

Critically, the Fair Work Commission now has jurisdiction to resolve and determine flexible working arrangements disputes including challenges about whether the request was refused for reasons other than “reasonable business grounds”.

Penalties

Employers and individuals (such as directors and managers) may be subject to penalties for non-compliance with the new changes.

Recommended Actions

We recommend employers:

• take a consultative and collaborative approach when dealing with flexible working arrangements requests
• exercise caution when considering flexible working arrangements requests and be prepared to satisfactorily explain the reasons for refusing such requests
• obtain advice regarding the timing, consultation and other technical requirements introduced by the changes as failing to comply with same may give rise to penalties and/or the commencement of Fair Work Commission proceedings
• update relevant business policies and procedures to ensure they align with current legal obligations
• train managers to ensure they are familiar with flexible working arrangements requirements in order to minimise the risk of non-compliance

Questions/Assistance

If you have any questions about the above or would like any other employment related assistance, please contact our Matthews Folbigg Workplace Solutions employment law team.

DISCLAIMER: This article is provided to readers for their general information and on a complimentary basis. It contains a brief summary only and should not be relied upon or used as a definitive or complete statement of the relevant law.

Liability limited by a scheme approved under Professional Standards Legislation