Division 7A Loan Agreement

A Division 7A Loan Agreement is for use when a company is lending to a single borrower who is a director, shareholder or associate of a director or shareholder of that company. Section 109N (1) (a) in Division 7A of the Australian Income Tax Assessment Act 1936 sets out strict provisions and measures to ensure that private companies do not make tax free distributions of profits to shareholders or shareholders' associates in the form of payments, loans or forgiven debts. Having a written Division 7A Loan Agreement is crucial and will be valuable in the event of disagreements or misunderstandings. (continued ...)