Division 7a Calculator 2025
Need Help With Your Division 7A Repayment?
Disclaimer
This calculator is provided for general information only and does not constitute financial, tax, or legal advice. By using this tool, you acknowledge that no professional relationship is created, that while we use ATO benchmark rates we make no warranties about the accuracy or suitability of results for your circumstances, and that you must seek independent professional advice from a qualified accountant before making any decisions. To the maximum extent permitted by law, we accept no liability for any loss, damage, tax penalties, or consequences arising from your use of or reliance on this calculator.
Our Division 7A Calculator is designed to help Australian business owners and company directors understand how Division 7A loans work and what repayments are needed to stay compliant. With this tool, you can easily see how your loan amount, benchmark interest rate, and loan term determine the minimum yearly repayment required by the Australian Taxation Office (ATO). This page explains how the calculator works, the key rules for complying loans, and how to use your results to make smarter decisions about managing company funds and avoiding unintended tax consequences.
How the Division 7A Calculator Works
When a private company lends money to a shareholder or their family members, Division 7A may apply. This calculator helps you determine the minimum yearly repayment, interest charges, and repayment terms needed to ensure compliance with ATO tax regulations and avoid unintended tax consequences such as a deemed dividend or unfranked dividend.
Just enter your loan amount, loan term, and benchmark interest rate. The calculator will show your yearly repayment, loan interest, and total amount payable under a complying loan agreement, helping you stay compliant and manage your company funds with confidence.
Key Rules for Division 7A Loans
To stay compliant with the Australian Taxation Office (ATO), every Division 7A loan needs to follow a few simple rules:
It must have a written loan agreement that meets Division 7A requirements before the company’s tax return is lodged for the financial year.
The loan must charge at least the benchmark interest rate — 8.37 % for FY 2025–26.
The loan term can be up to 7 years for unsecured loans or 25 years for secured loans backed by real property or other assets.
A minimum yearly repayment must be made by 30 June each income year to keep the loan in good standing.
If these conditions aren’t met, the borrowed money can be treated as a deemed dividend (often an unfranked dividend), which increases your taxable income and removes any potential franking credits.
What the Calculator Shows
After you enter your details, the calculator will provide:
Your minimum yearly repayment required
The loan interest and interest rate for the income year
A schedule showing repayments, principal and interest, and remaining loan balance
The total cost of the loan over its term
This helps you plan ahead, keep proper documentation, and stay compliant with the ATO’s tax regulations.
Key Requirements for Complying Loans
To meet the ATO’s rules under Division 7A, the loan must:
Be set out in a complying loan agreement before the company’s tax return is lodged for that financial year
Charge at least the benchmark interest rate for the year
Have a maximum loan term of 7 years (unsecured) or 25 years (secured)
Require minimum yearly repayments made by 30 June each year
Failing to meet these requirements can cause the loan to be treated as a deemed dividend, increasing your taxable income and removing any franking credits.
Common Mistakes to Avoid
Using company funds for personal expenses without a loan agreement
Forgetting to make the minimum repayment each year
Recording incorrect amounts in the journal entry on the company’s balance sheet
Ignoring unpaid present entitlements that arise in a trust structure
Each of these can lead to legal issues or extra tax implications.
Why It Matters
Following Division 7A rules isn’t just about compliance — it also protects your business from unexpected tax bills and helps you manage loans in a way that supports your financial success. By meeting your minimum repayments and keeping proper documentation, you can retain tax benefits and avoid extra tax on payments or director fees.
Worried Your Division 7A Loan Might Trigger Extra Tax?
Schedule a complimentary consultation with our team today to make sure your loan agreements, repayments, and company funds all meet ATO compliance requirements.
Frequently Asked Questions
When does Division 7A apply?
It applies when a private company provides financial accommodation — such as a loan, payment, or debt forgiveness — to a shareholder or their family members. If it’s not a complying loan, the amount may be treated as a deemed dividend.
What is a Division 7A Loan Agreement?
A loan agreement is a written record that sets the loan term, interest rate, and repayment terms. It helps ensure compliance with the ATO’s requirements and keeps the loan from being reclassified as a dividend.
What is the Benchmark Interest Rate for FY 2025–26?
The ATO’s benchmark interest rate for the income year ending 30 June 2026 is 8.37 %.
What happens if I miss the minimum yearly repayment?
Missing the repayment can cause the unpaid amount to be treated as an unfranked dividend, which you must pay tax on as part of your taxable income. To better understand the consequences of missing repayments, see this guide.
Can a loan cover personal use or personal expenses?
Yes, but it must be a complying loan that charges interest and has set repayment terms. Otherwise, it can create extra tax implications.
What if an Unpaid Present Entitlement arises from a trust?
If a trust owes money to a company (UPE), it may be treated as a loan under Division 7A unless managed correctly. After the Bendel decision, a UPE is not automatically a loan, but the ATO still expects careful treatment to avoid unintended tax consequences.
What’s the difference between secured and unsecured loans?
Secured loans use real property or assets as security and can run for up to 25 years. Unsecured loans have no security and must be repaid within 7 years.
Do I need to record the loan on my company’s balance sheet?
Yes. All Division 7A loans should appear in the company’s accounts with the proper journal entry and supporting documentation.
Can I take money out as a dividend instead of a loan?
Yes. Declaring fully franked dividends can sometimes reduce your overall tax, depending on your personal rate and tax return. Use our decision tool or speak with our team to compare the benefits.
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