Division 7A Loan Agreement

What types of loans can be documented in a Division 7A Loan Agreement?

A Division 7A Loan Agreement is used to document circumstances where a company makes a loan:

  • to a shareholder or shareholders of that company; or
  • to an associate of a shareholder of that company.
The term "associate" has the same meaning as set out in Division 7A of the Income Tax Assessment Act 1936 (Cth).

What loan term can I have with the Cleardocs Division 7A Loan Agreement?

The Cleardocs Division 7A Loan Agreement is only suitable for unsecured loans that are to be repaid within 7 years.

This document package is not suitable for loans for a term longer than 7 years, as these loans must be secured by a mortgage over land.

Can the Cleardocs Division 7A Loan Agreement be used under circumstances where there are unpaid present entitlements?

No, the Cleardocs Division 7A Loan Agreement is not designed to address issues relating to unpaid present entitlements.

The law around Division 7A loan agreements and unpaid present entitlements is complex and whether or not Division 7A will be applicable to unpaid present entitlements depends on the particular trust. Please seek legal advice from a tax lawyer if you require a document for this purpose.

You can read about how an unpaid present entitlement from trusts to corporate beneficiaries can be treated as a Division 7A loan here.