Division 7A – Commissioner’s discretion

The ATO is clarifying the application of the Commissioner’s discretion to disregard the operation of Division 7A, or to allow a deemed dividend to be franked.

It says the discretion may only be granted if an honest mistake or inadvertent omission has resulted in a breach of Division 7A and the circumstances support the exercise of the discretion.

Reliance on professional advice does not always constitute an honest mistake or inadvertent omission. The adviser’s actions must have contributed to the breach and the client’s reliance on the advice must have been reasonable.