Refinanced loans due to subordination
From the 2006-07 year, a private company loan can be refinanced when the loan becomes subordinated to another loan from another entity, and the refinancing of the private company loan to the shareholder (or their associate) takes place because of that subordination. The subordination must arise as a result of circumstances beyond the control of the entity to which the original loan was made. The private company and the other entity must have dealt with each other at arm's length in relation to the subordination. In such cases, the repayment of the old loan as part of the refinancing is not disregarded for Division 7A purposes.