Deferred start date
It was announced in the 2019/20 Federal Budget that the start date for the proposed amendments to Division 7A will be deferred until 1 July 2020.
This is a welcomed announcement given that there is no draft legislation available for review and the many unresolved issues were identified during the consultation process.
The view of the current coalition government is the Division 7A is an integrity measure and the amendments should discourage particular behaviours, such as borrowing funds from a related private company, rather than establish a reasonable basis on which such transactions could occur.
This conflicts with a different government policy, that of facilitating SME businesses obtaining finance given the challenges that they face in getting approval for business loans from major lenders.
Labor does not have an announced policy in relation to Division 7A, but it would be reasonable to assume that they would generally support improving a tax integrity measure.
This means that regardless of the outcome of the upcoming Federal Election, amendments to Division 7A are likely to be implemented during the next term of government.
Treatment of pre-2009 UPEs and old s108 loans
There is not an announced position from the government or Treasury on how they intend to deal with pre-2009 UPEs and old s108 loans.
However, judging from the Treasury consultation process it would appear that the preference is for all loan or loan like arrangements (such as UPEs), a single set of rules (the 10 year loan model) is preferred.
For pre-2009 UPEs and old s108 loans the preference appears to bring these under the same model as all new loans and UPEs, and to offer limited transitional provisions to ease the impact of changing the tax treatment of these balances.