Do you have a Loan from a Private Company (Including Your Own)?

If you have an outstanding loan from a private company at the time of the company’s lodgement date, you will need a complying Division 7A loan agreement to be in place.

The agreement needs to set out the minimum yearly payments required, made up of principal and interest. Payments need to commence in the income year after the loan is made.

If there is no loan agreement or a shortfall in the loan repayment then either the whole amount, or the shortfall amount, may be assessed as an unfranked dividend to the borrower.

This means the borrower will pay tax on the amount at their income tax rate.

Payments will need to be made by the end of each income year (i.e. 30 June). The benchmark interest rate needs to be used. The rate for the year ending 30 June 2024 is 8.27%.

Please Visit This Link for more information on Division 7A loans at the Australian Taxation Office (ATO) website.

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