Division 7A Fundamentals
Where practitioners often get it wrong
How clients can be caught by Division 7A
Fixing Division 7A 'problems'


Welcome to Knowledge Shop IQ (how IQ modules work)


The ATO continues to enjoy a high success rate when it comes to challenging the treatment of contractors under the superannuation guarantee legislation. The ATO has a strong incentive to monitor this area as liabilities can accumulate very quickly.


In this Knowledge Shop IQ module we help you identify arrangements that may be at risk of triggering significant superannuation guarantee liabilities and that steps that can be taken to minimise that risk. This is an issue that is not going away any time soon unless there are fundamental changes to the system.


See the IQ module outline. 

The Division 7A Module is part of the Intermediate I Program of 10 modules specifically designed to manage the training needs of your Intermediate team members across a year.



Level 2Level
Intermediate/ Accountant

1:32 minutes plus quiz questions

24/7 for 12 months

Downloadable reference notes

PD HoursPD Hours
1.5 PD Hours

We explore the practical issues of how clients are caught by Division 7A, how to minimise risk, and correctly calculating Division 7A exposure.

Introduction & Outline (0:59) 

The purpose of Division 7A and how it is triggered (3:48)

  • What is the policy intent behind Division 7A?
  • The circumstances that trigger Division 7A


Impact of Division 7A (5:06)

  • What happens when Div 7A is triggered from the perspective of the individual and the company
  • The exceptions and how they apply
  • The importance of deadlines on your ability to minimise risk
  • The concept of a deemed dividend and how it applies


Distributable surplus (12:49)

  • What is the distributable surplus and how does it apply
  • Why distributable surplus is not the same as retained earnings on the balance sheet
  • Working with net assets
  • Calculating distributable surplus correctly
  • The events and triggers that suggest there is a problem


Managing associates (5:53)

  • What is an associate?
  • Managing family groups
  • The problem areas


Dealing with Div 7A Payments (4:49)

  • What is considered to be a payment?
  • The exceptions and how they apply


Managing loans (11:55)

  • Why loans are often the problem area
  • Managing deadlines in practice
  • Avoiding a deemed dividend arising
  • The strict requirements of loan agreements
  • Dealing with payments in practice
  • What happens when a loan is in default
  • Timing and where problems arise
  • Section 109R and contrived arrangements – what to look out for


Forgiven debts (1:46)

  • What is a forgiven debt?
  • The statute of limitations and how Division 7A can be triggered without a client realising
  • Assignment of debt 


Exceptions (2:58)

  • The exceptions to Division 7A


Pre 4 December 1997 loans (4:10)

  • How the exclusion works for pre 4 December 1997 loans
  • Why you cannot rely on the exclusion
  • The events that trigger Division 7A on pre 4 December 1997 loans


Trusts and Division 7A (4:25)

  • Unpaid Present Entitlements (UPEs)
  • The ATO evolving position
  • What to look for in the accounts
  • The problem with the definition of a ‘loan’ for Division 7A purposes


UPEs as loans (7:52)

  • Step through an example of the interaction of UPEs and Division 7A
  • The current ATO position
  • Pre 16 December 2009 entitlements
  • Using sub-trust arrangements


Subdivision EA and older unpaid entitlements (5:39)

  • When and how does Subdivision EA apply?
  • How to avoid with Subdivision EA issues
  • What to look out for - how do you know you have a problem?


Practical issues (6:39)

  • The circumstances that you will come across that indicate your client may have a Division 7A issue
  • What happens when a deemed dividend has been triggered?
  • What do you need to recognise in the tax return


Quiz 1 (1:48)

  • Quiz 1
  • Quiz 1 answer and explanation


Quiz 2 (2:59)

  • Quiz 2
  • Quiz 2 answer and explanation


Quiz 3 (2:47)

  • Quiz 3
  • Quiz 3 answer and explanation

Quiz 4 (2:19)

  • Quiz 4
  • Quiz 4 answer and explanation


Quiz 5 (3:31)

  • Quiz 5 
  • Quiz 5 answer and explanation

What is Knowledge Shop IQ?

Knowledge Shop IQ is engaging, interactive online training available when you want it on most devices. Featuring knowledge driven quizzes developed by our technical specialists, IQ also enables you to prove your knowledge - it’s training that moves well beyond hours completed to knowledge acquired.


If you are going to spend time completing training, make that time worthwhile.


Once you have accessed your first IQ training module, all other Knowledge Shop IQ modules and webinars you participate in will show on your personal profile.

For managers, Knowledge Shop IQ gives you the ability to:

  • Assign training to your team, and
  • Track and measure performance.

Knowledge Shop IQ is an essential tool for any practice looking to truly manage professional development.


Got questions? Email us or call the team on 1800 800 232.


IQ Presenter

Michael Carruthers

Tax Director, Knowledge Shop

Michael Carruthers Director Knowledge Shop

Michael oversees the development of the tax team for Knowledge Shop and Hayes Knight in Sydney and is head of the Hayes Knight group’s national tax committee. 


Michael has a knack for seeing through the complexity and helping practitioners work through highly technical issues with certainty and accuracy. 


He is a member of the advisory panel for the Board of Taxation and was an expert panel member for the Board of Taxation’s review of tax impediments facing small business.


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Michael was the Thought Leader of the Year at the 2016 Accounting Awards


The Managing PSI Module is part of the Intermediate I Program of 10 modules specifically designed to manage the training needs of your Intermediate team members across a year.




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All registrations to Knowledge Shop events are subject to our terms and conditions which include a cancellation policy. No refunds are provided once a module has been accessed.