Division 7A Company Loan Agreement

When to use this agreement

Division 7A of the Income Tax Assessment Act 1936 (the Act) automatically treats payments, loans and debts forgiven by private companies to shareholders and shareholders’ associates as assessable dividends.

Division 7A sets out strict provisions that ensure private companies are restricted from making tax free distributions of profits to its directors and shareholders in the form of loans.

The Act makes it crystal clear that such loans must be approved by the company and the borrower. Furthermore the agreement between the parties must be a qualifying written agreement that satisfies certain minimum interest rate and maximum term criteria.

Our Div 7A company loan agreement is a formal agreement prepared and signed by the company and the borrower. It ensures compliance under section 109N of the Act and protects your company from being deemed by the ATO to have given money to the borrower.

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This Division 7A Company Loan Agreement includes the following Provisions -

• The names of the parties and a statement that the parties have agreed to the loan terms
• The Loan amount
• Date the loan is drawn down
• Period of the loan or the term
• Interest rate payable
• Date the written agreement was made.
• Default and consequences
• Power of attorney
• Governing Law
  

Sample Document Excerpt

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