Use of assets in private companies

The Tax Office has advised that from 1 July 2009 (i.e., from the 2009/10 financial year just passed), where an asset is provided for the use of a private company shareholder (or associate), it will generally be treated as a 'payment' if the company provides them for:

• free; or
• less than their market value.

Example

Marina is a shareholder of a private company that owns a city apartment.  The apartment is generally available for rent. 

However, Marina asks the company not to rent the apartment out for a week so that she and her family can use it (for free) over a long weekend.  Marina's use of the apartment is a 'payment' for the purposes of the deemed dividend rules.

The amount of any deemed dividend will be the amount the company normally charges for one week's rent.

There are a number of exceptions to these rules so please contact our office if you would like to know more about the operation of these new rules or the exceptions.