The ATO has issued practice statement PSLA 2007/20 setting out how taxpayers can take corrective action to fix mistakes made between 2001-02 and 2006-07 regarding payments and loans from their
private companies and avoid penalties under Division 7A. The Commissioner has a discretion to enable him to provide relief for
deemed dividends that have arisen under Division 7A because of an
honest mistake or inadvertent omission.

The Practice Statement gives examples of omissions and corrective action where the exercise of the Commissioner’s discretion is not required.

If a taxpayer takes corrective action by 30 June 2008 they will not have to pay interest and penalties. However, even if they don’t have
to pay a penalty or interest, taxpayers will have to pay the correct
amount of tax provided the time limits under the law allow it.

From 1 July 2008, the Tax Office will resume audit work to ensure
payments made by private companies are correctly accounted for and
company loans are not used to distribute tax free profits.