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Division 7A Loan Agreement

The Cleardocs Division 7A Loan Agreement can be used when a company makes a loan:

  • to a shareholder or shareholders of the company; or
  • to an associate of a shareholder of the company — the term 'associate' has the same meaning as in Division 7A of the Income Tax Assessment Act 1936 (Cth).
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What documents are included in the Cleardocs Division 7A Loan Agreement?

The Cleardocs Division 7A Loan Agreement package includes:

  • the Loan Agreement; and
  • an Establishment Kit explaining what to do next.

What information do you need to order a Division 7A Loan Agreement through Cleardocs?

Our checklist outlines all the information you require.

Why arrange a Division 7A Loan Agreement?

If you have a Division 7A Loan Agreement in place and borrow money from a Pty Ltd company in accordance with the agreement, you avoid the loans being classified as dividends. This means that the loans do not attract the unfavourable tax consequences of Division 7A of the Income Tax Assessment Act 1936 (Cth).

Seek legal advice

The Division 7A Loan Agreement information here should be considered general in nature, and in no way interpreted as legal advice. You must always seek your own independent legal, accounting and financial advice about your particular situation. The summary on this page is for information purposes only.

Frequently Asked Legal Questions

Cleardocs is not a law firm. So as with all the legal material on this site, the answers to these "frequently asked legal questions" are provided by the law firm Maddocks. Cleardocs does not endorse those answers.

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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.


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