Division 7A Loan & Minimum Repayment Calculator

Division 7A treats a loan from a private company to a shareholder or associate as an unfranked deemed dividend unless it is placed under a complying written loan agreement. A complying loan must charge at least the ATO benchmark interest rate and meet the minimum yearly repayment over a maximum term of 7 years unsecured, or 25 years if secured by a registered mortgage over real property. Worked example: the minimum yearly repayment is the loan amortised over its term at the ATO benchmark interest rate. Using an illustrative 8% rate, a $100,000 unsecured loan over the 7-year maximum term needs a minimum repayment of 100,000 × 0.08 ÷ (1 − 1.08⁻⁷) = about $19,207 a year. Secured loans can run for up to 25 years. The benchmark rate is set by the ATO each income year, so check the current rate, and if a minimum repayment is missed the shortfall can be treated as an unfranked dividend.