Division 7A: Company Loans to Directors Explained
If you own a private company and take money out – or the company pays your personal bills – Division 7A rules may apply. Without the right paperwork, the amount can be treated as an unfranked dividend and taxed in your hands. UV TAX helps company owners stay on the right side of these rules.
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What Division 7A covers
- Loans from a private company to shareholders or their associates (such as family members or related trusts)
- Payments made for a shareholder’s private benefit – for example, personal bills paid by the company
- Debts forgiven by the company
- Use of company assets by shareholders – such as a company-owned car or holiday home used privately
How to avoid a deemed dividend
Repay in time
Repay the amount before the company’s tax return lodgement due date.
Complying loan agreement
Put a written loan agreement in place before the lodgement due date, with interest at least at the benchmark rate set each year.
Minimum repayments
Make the minimum yearly repayment each year. Maximum terms are generally 7 years, or 25 years if secured by a registered mortgage over real property.
Pay a salary or dividend
Sometimes paying a wage or a declared dividend is a cleaner way to take money out.
Common Division 7A traps
- Treating the company bank account like a personal account
- Not putting a loan agreement in place by the deadline
- Missing the minimum yearly repayment
- Family members or family trusts borrowing from the company
- Private use of company assets without paying market value
How UV TAX helps
- Review your director loan account each year
- Prepare complying Division 7A loan agreements
- Calculate minimum yearly repayments and interest
- Plan wages and dividends to clear loans tax-effectively
- Clean up past issues before they become a problem
⚠️ General information only – not tax or legal advice. Division 7A is a complex area with many exceptions and recent court decisions. Specific advice is essential. This page is a simple overview as at November 2026 and does not consider your personal circumstances. Tax laws, rates and thresholds change regularly. Please get advice for your situation before acting.
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0466 268 405Frequently asked questions
What is Division 7A?
Tax rules that can treat loans, payments or debt forgiveness from a private company to shareholders or associates as taxable dividends.
How do I avoid Division 7A?
Usually by repaying the amount before the company’s lodgement due date, or by putting a complying loan agreement in place and making minimum yearly repayments.
What interest rate applies?
A benchmark interest rate set for each income year. We confirm the current rate when preparing your loan calculations.
Does it apply to family members?
Yes. Associates such as relatives and related trusts can be caught.
Related
General information current as at November 2026.