Insights · Tax ·
Division 7A loans in 2026–27
If you take money out of your private company that isn’t wages or a declared dividend, Division 7A can treat it as an unfranked dividend, unless it is set up as a complying loan.
What Division 7A catches
- Payments from the company to a shareholder or associate.
- Loans to shareholders or associates (including family members and related trusts).
- Debts the company forgives.
- Unpaid present entitlements from trusts can also be relevant.
The complying loan
To avoid a deemed dividend, a loan must be under a written agreement before the company’s tax return lodgment date, charge at least the benchmark interest rate, and be repaid with minimum yearly repayments over a maximum term (seven years unsecured, or 25 years if secured by a registered mortgage over real property).
The 2026–27 benchmark rate
The benchmark interest rate for the income year ending 30 June 2027 is 8.77% (8.37% for 2025–26). Minimum repayments are recalculated each year with the new rate.
Practical tips
- Track drawings monthly, not at year end.
- Plan to cover the minimum repayment (often by declaring a dividend or paying salary) before 30 June.
- Don’t use the company account for personal costs without a plan.
See How much tax to set aside and company vs trust.
Quick answers
What is the Division 7A benchmark rate for 2026–27?
8.77%, per the ATO.
How long can a Division 7A loan run?
Up to seven years unsecured, or 25 years if secured by a registered mortgage over real property.
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Sources
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General information only. This doesn’t take your circumstances into account and isn’t tax, financial or legal advice. Talk to your accountant or registered tax agent before acting. PRM is not a registered tax agent; tax agent services are provided by Australian Tax & Super Pty Ltd (TPB 25291395).