Amalgamated loans

A private company will be taken to make an amalgamated loan to you during an income year if the company makes one or more loans to you during the year and each loan (called a 'constituent loan'):

  • is not fully repaid before the lodgment day
  • would be treated as a dividend but for the exclusion for loans with a written agreement, meeting the criteria for minimum interest rate and maximum term
  • has the same maximum term (that is 25 years for a secured loan or seven years for other loans).

The amount of the amalgamated loan is the sum of the amounts of constituent loans that have not been repaid before the lodgment day for the year of income in which the amalgamated loan is made.

From the 2006-07 income year, an unsecured loan can be converted to a loan secured by a mortgage over real property with a longer maximum term. When the term of an existing loan is simply extended because of a mortgage, a new amalgamated loan is taken to be made in the income year prior to the income year in which the extension is made. The old amalgamated loan is disregarded if the amalgamated loan comprised one constituent loan. If the old amalgamated loan comprised more than one constituent loan, the amount of the old amalgamated loan is reduced by the amount treated as a new amalgamated loan.

A private company may have a number of amalgamated loans to a shareholder or their associate at any one time. This will occur where relevant constituent loans have been made over a number of income years. There will be an amalgamated loan for each income year in which the conditions for amalgamated loans are satisfied.

Private companies with more than one amalgamated loan will need to maintain records for each amalgamated loan.

If loans are made to more than one shareholder or associate, there will be a separate amalgamated loan for each entity. Loans to different shareholders or associates are not grouped.

    Last modified: 27 Jul 2016QC 17341