Division 7A Loans

There are some exceptions to the rules, but loans that are generally subject to Division 7A include those made:

• By a private company to a shareholder or a shareholder's associate;

• By a private company to an family trust;

Intercompany loans are excluded from the Div 7A provisions (s109K).

If you are unsure whether or not s particular payment would fall under the Division 7A provisions, ask yourself:

1. Was this payment made to an associated entity other than a company?*

2. Is it reasonable to assert that the payment was made due to the shareholder's influence?

If you answered yes to both of these questions, it is more than likely that the payment will be subject to the Division 7A provisions. If you are still in doubt, you should get professional legal advice.

* interposed entities are ignored for the purposes of Division 7A