You MUST seek advice from a qualified professional before using this agreement to check that it meets your specific circumstances. A Division 7A Loan Agreement is a document that formalises loans between a private company and an individual. If a company were to loan money to a shareholder or associate without a Division 7A agreement, the amount may be counted towards the individual’s income for that tax year. This agreement is particularly relevant when a company's loans are audited as loans that are not “formalised” with a Division 7A Loan agreement may be considered a dividend.

Complying under Division 7A

In order for a loan to be compliant and to avoid being deemed a taxable dividend, the ATO indicates it must satisfy the following conditions:

• A written agreement such as this one must be established before the company’s income tax return deadline.

• The annual interest rate of the loan must be at least equal to the Division 7A benchmark rate.

• For loans that are secured by property, as per the ATO’s guidelines, the term should not exceed 25 years 

• For all other loans the terms should be no longer than 7 years.

• The minimum yearly repayment must be met.

Use this Division 7A Loan Agreement If:

• You’re a private company and;

• You want to provide a loan to a shareholder or associate 

What does this Division 7A Loan Agreement Cover?

• Lender and borrower details

• Acknowledge of loan agreement

• Interest rate

• Loan term

• Repayment terms

• Definitions

Further Information:

• Important Legal Considerations if You Are Making a Loan

• How to Create a Loan Agreement