Division 7A: taking money out of your company the right way

If you take money out of your private company that is not wages, a dividend or a repayment of what the company owes you, Division 7A can treat it as an unfranked dividend in your hands. The same can apply to payments to your family, and to company assets you use privately.

The usual fix: a complying loan agreement

A written loan agreement in place by the earlier of the due date and the actual lodgment of the company's tax return, with interest at least at the ATO benchmark rate and minimum yearly repayments, stops the amount being treated as a dividend.

• Loans not secured by a registered mortgage over real property: a maximum term of 7 years
• Loans secured by a registered mortgage over real property worth at least 110% of the loan: a maximum term of 25 years
• The benchmark interest rate is set by the ATO for each income year
• Minimum repayments are due by 30 June each year; missing one can turn the shortfall into a deemed dividend
• Repaying and then re-borrowing the same money is ignored

Unpaid trust distributions

Since the High Court's 2026 Bendel decision, a trust distribution owed to a company but not yet paid is generally not, by itself, a Division 7A loan. It still needs planning each year: section 100A, how the trust uses the money, and Division 7A once the amount is turned into a loan or the company lends money back can all apply.

What to do

Track drawings from the company during the year, put loan agreements in place before the lodgment day, and plan repayments with salary or dividends. We check this for every company client as part of year-end.

This is general information, not advice for your situation. Rates and rules change; we confirm the current figures before acting.