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Access My Company's Funds Without Incurring Excessive Taxes (Avoiding Div7A Issues)

Calculate the Yearly Minimum Repayment

Funding your Minimum Yearly Loan repayments

Get Rid of Div7A Loan

Division 7A Calculator

How to use this calculator​

  • Select the income year of the loan (the year you borrowed money from the company, e.g., FY2021-22).
  • Select the income year for which you wish to calculate the minimum yearly repayment (e.g., FY2022-23).
  • Enter the total of the unsecured constituent loans that were made in the 2021-22 income year before any repayments were made.​
    (For example, refer to the closing loan balance as at 30 June 2022 on your company’s balance sheet (it should be listed under Assets).
  • Enter the lodgment day. This is the earlier of the due date for lodgment or the actual lodgment date for the private company’s tax return for the 2021-22 income year (e.g., 15/5/2023).​
  • Click “add” to input repayments made during the 2022-23 income year.​
    • Enter the date of the loan repayment.
    • Enter the amount of the repayment.
    • Continue adding loan repayment details. If no repayment was made, leave it blank.​
  • Click “show my result.”

Frequently asked questions

What is Division 7A?

Division 7A is a tax provision in Australia designed to prevent shareholders of a private company from accessing company profits without paying additional tax. Normally, a company pays tax on its profits at a lower rate (25% or 30%), while individual shareholders might have a higher marginal tax rate (up to 47%). This could create a tax advantage of up to $22,000 for every $100,000 of income. Division 7A ensures that this tax advantage is eliminated.

For Example: If you have a family-owned company, and you decide to lend money from the company to yourself, your family member, or someone closely connected to your family. Division 7A can treat this loan as if the company paid you an unfranked dividend, and you might have to pay tax on it.

When Does Division 7A Apply?

For Division 7A to be applicable, the following conditions must be met:

  1. The entity in question is a private company.
  2. The company has recorded profits or retained earnings.
  3. A payment or loan has been issued by the company.
  4. The payment or loan has been made to a shareholder of the company or an associate of the shareholder.

If these conditions are met and Division 7A applies, the payment or loan is treated as a dividend from the company to the shareholder or their associate.

What is a division 7A Loan?
When the company transfers funds to a shareholder, the best way to handle it for tax purposes is through a Div 7A loan. This is basically an official loan agreement between the shareholder and the company. It shows that the shareholder got the money and promises to pay it back, usually within seven years. It’s a smart way to manage the money while following tax rules.
Why does the ATO have Division 7A rules?
Division 7A exists to ensure shareholders don’t access company profits without paying the correct amount of tax. Without it, you could potentially benefit from the company’s lower tax rate instead of your personal rate, which is often higher. Essentially, the ATO implemented Division 7A to prevent this kind of tax advantage and make sure everyone pays their fair share,
Can I withdraw company profits for personal use?
No, withdrawing company profits for personal use can trigger Division 7A, treating it as an unfranked dividend. This means you’d owe tax at your personal rate, potentially a significant amount. For example, a $750,000 withdrawal could lead to a tax liability of up to $352,500 (at a 47% rate, including the Medicare levy). To explore strategies for accessing company profits without these tax implications, refer to our article on “How to Withdraw Funds from Your Private Company – Avoiding Division 7A Penalties“.​
Can I use company funds for personal asset purchase?
While it may be tempting, using company funds for personal asset purchases can have substantial tax consequences. If the company acquires an asset that you use personally, Division 7A may consider it a deemed dividend, valued at the asset’s market value or the cost of using it. For a detailed explanation and strategies to handle such situations, please refer to our article, “How to Access Funds from Your Private Company – Avoiding Division 7A Penalties“.
Can I transfer company profits to my spouse or trust instead of a loan?
Exercise caution. Division 7A rules encompass ‘associates,’ including spouses and trusts. Even if the transfer indirectly benefits you, Division 7A might still classify it as a dividend. For a deeper insight and possible solutions, explore our article on “How to Access Funds from Your Private Company – Avoiding Division 7A Penalties“.​
I've heard about setting up another company and moving the funds there. Does this work?

This isn’t a foolproof workaround. Division 7A’s “interposed entity” rule can catch such strategies. If you’re considering this or similar tactics, our article on “How to Take Money Out of Your Private Company – Avoid Division 7A Penalties” offers valuable insights.

What's the best way to access my company's profits without getting a huge tax bill?

The most compliant method is to declare a fully franked dividend. While you’ll still face tax implications, this approach is straightforward. Our article on “How to Take Money Out of Your Private Company – Avoid Division 7A Penalties” provides a detailed guide on best practices and solutions.

What happens if my loan doesn't comply with Division 7A?

Non-compliant loans under Division 7A are treated as unfranked dividends, leading to higher taxes. To prevent a tax rate which could exceed 60%, it’s crucial to ensure your loan is compliant. We offer specialist assistance to ensure your loan aligns with Division 7A regulations. Click here for Division 7A Solutions

How do I ensure my loan is Division 7A compliant?

To be Division 7A compliant, loans must be repaid or structured into a Division 7A-compliant loan before the lodgment day. If you’re uncertain about this, we’re here to help. Contact us to ensure your loan is compliant.​

What are the repayment terms for Division 7A loans?

The repayment terms are 25 years for loans secured over property and 7 years for unsecured loans. The loan term affects the minimum repayment, with 7-year loans having higher repayments than 25-year loans. Facing challenges with minimum repayments? Consider adjusting your loan term. Learn more about this solution here.​

What if I can't make the minimum repayments?

Failing to meet the minimum repayments can result in the loan being deemed an unfranked dividend, which has tax implications. To understand various strategies and ensure you meet your minimum repayments, refer to our article on how to fund your Division 7A minimum yearly repayment.​

Is it better to take company money as a loan or as a salary/dividend?

This decision relies on individual financial situations, tax brackets, and company profit margins. To gain clarity on the best option for you, schedule a comprehensive tax planning session with us. Click here to begin, and we’ll help you make the smart choice.

Would it be simpler for me to repay all DIV7A loans?

Repaying all DIV7A loans can simplify matters, but it’s vital to assess the broader financial and structural implications. We have solutions to help you eliminate your DIV7A loan and expert guidance for optimizing your setup. To learn more, click here

Navigating Division 7A can be complex. We’re here to assist, ensuring you benefit from the best strategies while remaining compliant. Don’t leave it to chance; let’s get it right together.

Talk to a DIV7A Specialist

Still have questions or want to discuss your unique circumstances? Our DIV7A Loan specialists are here to help.

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Our team of DIV7A specialists is here to provide you with personalized solutions. Start by completing the Division 7A Loan Assessment Form, and we'll evaluate your situation promptly. Your financial success is our priority.

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This result is generated based on the information you’ve provided through our calculator. Please note that it’s intended for general informational purposes only. To obtain specific and personalized advice tailored to your unique situation, we strongly recommend consulting with a qualified Tax specialist. Tax laws are complex and can vary, so professional guidance is essential to ensure compliance and make informed decisions.
Privacy Assurance: Your information will be kept confidential and used only for the purpose of providing Division 7A-related assistance.
Privacy Assurance: Your information will be kept confidential and used only for the purpose of providing Division 7A-related assistance.