Private companies may be incentivized to provide loans to a shareholder or their associates during the income year in order to save income tax. In order to remedy possible inequalities due to shareholder loan contracts, the government imposes compliance with a series of rules. Loans that follow these rules under the Income Assessment Act 1936 are also exempt from the dividend. The maximum duration of a compliant credit agreement is seven years. In the event that the loan is covered by a registered mortgage on real estate, the maximum term is 25 years. For a maximum period of 25 years, the market value of the property (excluding other guarantee commitments of the property before the loan) must also represent at least 110% of the loan amount. What are the criteria of a compliant credit agreement In addition to compliance with the minimum criteria of interest rate and maximum duration, compliance with loan agreements must be concluded within the framework of a written agreement before the filing date of the private company. Credit agreements that meet these requirements are not considered a dividend in the income year in which the loan is made. There is no prescribed form for written agreement. However, the agreement should at a minimum: the Convention to Promote Compliance with International Conservation and Management Measures by Fishing Vessels on the High Seas (the Compliance Convention) aims to strengthen the role of flag States and to ensure that a State strengthens its control over its vessels in order to ensure compliance with international conservation and management measures.
The compliance agreement also aims to prevent the « re-flag » of vessels fishing on the high seas flying the flag of States that are unable or unwilling to impose international fisheries conservation and management measures. Loans must have an interest rate greater than or equal to the reference rate described in Division 7A of the Income Tax Assessment Act 1936, published annually by the ATO. The reference rate for 2020 is 5.35% (below the variable rates on bank loans) and is 4.52% for 2021. This interest rate must be applied for each year following the year in which the loan was made. It recognizes the special responsibility of flag States to ensure that none of their vessels fish on the high seas, unless authorized to do so and that they can effectively exercise their responsibilities to ensure that their vessels comply with international measures. Amended provisions for virtual business meetings that you must comply With The keeping of registrations of fishing vessels, international cooperation and implementation are fully covered by the provisions of the agreement. The status of the compliance agreement is available here and the agreement itself is available here. The Compliance Agreement was approved by the FAO Conference at its 27th Session in November 1993 and entered into force on 24 April 2003 after the deposit of the twenty-fifth declaration of acceptance with the Director-General of FAO. . .