Division 7A Benchmark Interest Rate Increases to 8.77% for the 2026–27 Income Year
The Australian Taxation Office (ATO) has confirmed that the Division 7A benchmark interest rate for the 2026–27 income year (year ending 30 June 2027) is 8.77%, up from 8.37% for the 2025–26 income year.
If your private company has made a complying Division 7A loan to a shareholder or their associate, it is important to ensure that your minimum yearly repayment (MYR) is calculated using the correct benchmark interest rate.
What is Division 7A?
Division 7A of the Income Tax Assessment Act 1936 is an integrity measure that prevents private companies from making tax-free distributions of profits to shareholders or their associates through loans, payments or debt forgiveness.
Where a loan satisfies the Division 7A requirements, including being covered by a complying loan agreement, it can avoid being treated as a deemed dividend, provided the annual obligations are met.
Division 7A Benchmark Interest Rate
| Income Year | Benchmark Interest Rate |
|---|---|
| 2025–26 | 8.37% |
| 2026–27 | 8.77% |
The benchmark interest rate is determined each year using the Reserve Bank of Australia’s Indicator Lending Rates – Bank Variable Housing Loans Interest Rate, published before the start of the income year.
Why the Interest Rate Matters
The Division 7A benchmark interest rate is used to calculate the minimum yearly repayment (MYR) required under a complying Division 7A loan.
A higher benchmark interest rate may increase the amount that must be repaid during the income year to satisfy the Division 7A requirements.
Failure to make the required minimum yearly repayment may result in all or part of the outstanding loan being treated as an unfranked dividend for income tax purposes.
What Should Private Companies Do?
If your company has Division 7A loans, consider reviewing:
- Outstanding shareholder loan balances.
- Minimum yearly repayment calculations for the 2026–27 income year.
- Whether repayments will be made before the required deadline.
- Loan documentation to ensure it remains compliant with Division 7A.
Reviewing these matters before year end can help avoid unintended tax consequences.
Historical Division 7A Benchmark Interest Rates
| Income Year | Rate |
|---|---|
| 2026–27 | 8.77% |
| 2025–26 | 8.37% |
| 2024–25 | 8.77% |
| 2023–24 | 8.27% |
| 2022–23 | 4.77% |
| 2021–22 | 4.52% |
How Gavin Ma & Co Can Help
Gavin Ma & Co assists private companies with:
- Division 7A loan compliance
- Preparation of complying loan agreements
- Minimum yearly repayment calculations
- Shareholder loan account reviews
- Company tax compliance and tax planning
If you have outstanding shareholder loans, we can review your Division 7A position and help ensure you meet your annual compliance obligations.
Frequently Asked Questions
What is the Division 7A benchmark interest rate for the 2026–27 income year?
The benchmark interest rate is 8.77%.
What was the benchmark interest rate for the 2025–26 income year?
The benchmark interest rate was 8.37%.
Who does Division 7A apply to?
Division 7A generally applies to private companies that make loans, payments or forgive debts owed by shareholders or their associates.
What happens if the minimum yearly repayment is not made?
If the Division 7A requirements are not met, all or part of the outstanding loan may be treated as an unfranked dividend for income tax purposes.
Disclaimer
This article is intended as general information only and does not constitute taxation, legal or financial advice. The information does not take into account your personal or business circumstances. You should obtain professional advice before taking any action. Gavin Ma & Co is a registered tax agent and provides taxation and accounting services in accordance with Australian taxation laws.