• Loans not treated as dividends (excluded loans)

    A loan is not treated as a dividend:

    • if it is made to another company (not in the capacity of trustee)
    • to the extent that it would otherwise be included in your assessable income (under a tax law other than Division 7A)
    • to the extent that it would be excluded from your assessable income (under a provision of the tax law)
    • if it is made in the ordinary course of business and on the usual terms the private company applies to similar loans to entities at arm's length
    • for the income year it is made if it is put under a qualifying written agreement before the private company's lodgment day (see Loans made under written agreements)
    • if it is made in the course of winding-up the private company by a liquidator, provided it is fully repaid by the end of the next year (note that if the loan is not fully repaid by the end of the next year it cannot otherwise be an excluded loan)
    • if it is made to purchase shares or rights under an employee share scheme
    • if it is an amalgamated loan in the year it is made and in the following years, provided the required minimum yearly repayments are made (see How do you calculate amounts required to repay an amalgamated loan?)
    • if it is an amalgamated loan, and in a year following the year it was made, you failed to make the required minimum yearly repayment because of circumstances beyond your control, and the Commissioner is satisfied that treating the loan as a dividend would cause you undue hardship (see Commissioner's discretion not to treat an amalgamated loan as a dividend)
    • from the 2006-07 year, if the loan is an amalgamated loan, you failed to make the required minimum yearly repayment because of circumstances beyond your control and the Commissioner exercises his discretion to disregard the dividend if the shortfall is paid within a specified time (see Commissioner's discretion not to treat an amalgamated loan as a dividend).
      Last modified: 27 Jul 2016QC 17341