All companies wishing to avoid tax penalty under Division 7A are strongly advised to implement loan agreements before lending to associates. Where a loan agreement is in place between the company and affiliated entity, deemed dividend provisions will not apply. The following conditions must also be met:
- A written, standardised loan agreement must be in place before company tax return is due or lodged (whichever comes first);
- Minimum repayment on loan must be made before aforementioned date;
- Loan term not exceeding 7 years for any unsecured loans, and 25 years for mortgage-secured loans;
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A minimum rate of interest must be charged.
Division 7A Company Loan Agreement Available for Immediate Download More Information Click Here