Division 7A calculator and decision tool

Division 7A - payments, loans and debts forgiven by private companies

Where a private company directly or indirectly makes a payment or loan to a shareholder or their associate, or forgives a debt owed to the company by a shareholder or their associate, the company may be taken under Division 7A of Part III of the Income Tax Assessment Act 1936 (Division 7A) to have paid them a dividend. In this situation, the shareholder or their associate may need to include this amount in their tax return as an unfranked dividend.

About the tool

The Division 7A calculator and decision tool has two main components:

1. Decision tool

This component will ask you a series of questions to help you determine whether a direct transaction by a private company to a shareholder or their associate will be deemed a dividend.

2. Calculator

This component will:

• calculate the minimum yearly repayment required on a loan to avoid a deemed dividend arising under Division 7A
• calculate the amount of the loan not repaid by the end of an income year.

The Division 7A calculator and tool is currently being updated. The update will clarify how the amount of the amalgamated loan the private company is taken to have made is determined. Payments made after the end of the year of income but before the lodgment day are taken into account in calculating the amount of the amalgamated loan. However, they are also included, for the purposes of working out whether there is a minimum yearly repayment (MYR) shortfall, in the total amount (if any) paid to the private company in the income year after the loan was made (the first MYR year). The calculator and tool is also being updated to reflect this.

For additional information, see ATO ID 2010/82.

If no repayments have been made after the end of the income year in which the loan was made but before the lodgement day for that year the update won't result in any change.

Information you will need

To calculate the minimum yearly repayment you will need to know:

• the income year in which the loan was made
• the original amount of the loan or the amount of the loan not repaid by the end of the previous year of income
• the actual term of the loan, and
• details (date and amount) of any repayments attributable to that loan.

Use the Division 7A calculator and decision tool.

What to read/do next

To learn more about the operation of Division 7A, visit Division 7A essentials.