Division 7A: when loan repayments are not taken into account

December 8, 2022

The ATO has released further guidance and examples on when Division 7A loan repayments are not taken into account when working out:

  • The minimum yearly repayment
  • How much of the loan has been repaid.

The ATO is seeing situations where payments are being made that do not satisfy the requirements and will not be taken into account as loan repayments for Division 7A purposes, such as: 

  • Loans being repaid shortly before the private company’s lodgment day with the intention of directly or indirectly reborrowing a similar or larger amount from the same company.
  • Money or assets that are directly or indirectly borrowed from a company in order to make repayments, including minimum yearly payments, for a loan from that same company.
  • A journal entry which appears to record a payment being made on a date when no payment was actually made (for example, a back dated journal entry).
  • A loan is obtained indirectly when it is received through an interposed entity arrangement, such as interposed companies and trusts.