Must the written agreement be in place at the time the loan is made?

No, but the written agreement, meeting the minimum interest rate and maximum term criteria, must be in place before the earlier of the due date for lodgment or the date of lodgment of the trust's tax return for the income year in which the loan is made.

Example 7

The same facts as in example 5 except that Robert did not repay the $30,000 loan on 28 February 2008. But he did enter into a written loan agreement on 30 July 2007 which included terms that meet the minimum interest rate and maximum term criteria for the loan to be an excluded loan. In this case, Robert is not taken to receive an unfranked dividend for the income year nor subsequent income years so long as the required minimum yearly repayment is made.

    Last modified: 18 Aug 2010QC 17634