Avoiding avoidance – restructuring away from Division 7A

Ken Schurgott CTA (Life)
Practitioners and their clients continue to wade through the minefield that is Division 7A. Traps and complications can surprise even the wariest of advisers, with serious impacts for the client and their relationship with their adviser.

From the newly released PCG 2017/13 (covering how to deal with UPE’s under sub-trust arrangements maturing in the 2017 and 2018 income years) to the potential application of subdivision EA, the rules around Division 7A are complex and intersect with many other areas of tax legislation.

We recently spoke with Ken Schurgott CTA (Life), Director of Schurgott & Co Lawyers and past National President of The Tax Institute, about Division 7A and the restructuring of entity arrangements. This is the subject of his upcoming session at the Division 7A Day in Perth at the end of October. 

Ken told us that “Division 7A is a boon for advisers, but the detail is treacherous when it comes to structuring around the provisions. That is where we will be going in the workshop – looking at what to avoid when engaging in avoidance. I have found myself thinking about what Mr Shorten’s plans might mean for Division 7A, but maybe we shouldn’t go there just yet.”

Division 7A exposures are often only exposed when accounts are being prepared. Ken’s session will consider how to restructure entity arrangements to avoid ongoing Division 7A exposures and the traps that lie in wait. Looking at common Division 7A exposures, he will cover repayment options, small business considerations and Section 100A exposures. He will also provide some worked examples.

Ken identified some of the typical blind spots facing practitioners as “everything from total ignorance to self-indulged certainty, when nothing can be certain. It is surprising to find that total ignorance is not uncommon. Senior tax officers don’t believe me on this.

“Delegates will likely walk away from this session with a healthy degree of cynicism and a desire to read the legislation before they put pen to paper,” he said.

Ken specialises in taxation matters and has extensive experience in business structuring, business sales and acquisitions, asset protection, succession planning and trust and estate law. Highly experienced in tax dispute matters, negotiations for settlements, mediations and conciliations and litigation, he regularly appears before the Administrative Appeals Tribunal and the NSW Civil and Administrative Tribunal and instructs counsel in matters before the Courts. 

Lately, Ken says he finds himself “taxed out and enjoying what happens when seniority arrives. I find myself involved in more and more succession planning like wills and other stuff for old wealthy dudes with extremely complicated structures gifted to them by generations of accountants and which are completely unable to be understood by those about to inherit. I don’t know how anyone drafts a will without some tax knowledge – but they do!”

When he finds a spare moment, Ken says: “I like to revel in the Adelaide Crows winning, and by the time the Division 7A Day has come around I hope that the ultimate prize is theirs. Apart from that, I have too many collections in disarray to mention here. Travel would be good and I am looking forward to Paris next July 31st for a silver wedding anniversary, and yes, I am planning to take my wife along.”

Ken will be joined by a host of Division 7A experts from practice and the ATO at the Division 7A Day, which will also cover:
  • Subdivision E and its interaction with other subdivisions within Division 7A, as well as Part IVA
  • applying to use the Commissioner’s discretion
  • sub-trust arrangement.
Delegates will also have an opportunity to hear direct from the ATO on current issues relevant to Division 7A.

You can find out more about the program and the presenters on our website.

Please join us at Crown Perth on 24 October 2017 for the Division 7A Day.

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