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Div 7A Loan Agreement Template

In the case of a Division 7A loan agreement between a private company and a shareholder or partner, the operation of Division 7A is cancelled by the terms of the loan agreement. Where the loan is made in the previous year by income resulting from the liquidation of a business, the amount treated as a dividend is the amount of the loan that has not been repaid at the end of the current income year. Sally and XYZ Pty Ltd agree to convert the payment into a loan prior to the private company`s loan date. The loan provisions of Division 7A now apply. The law aims to prevent private companies from making tax-exempt profit distributions to shareholders (or their associated enterprises) in the form of loans. If the loan is not covered by the exclusions under Division 7A, it is treated as an eligible dividend and taxed as a dividend. Some payments are still taken into account, even if the intention is to get another loan at the time of payment…

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