Free Division 7A Loan Agreement Templates – Australia

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Having a Division 7A loan agreement in place is one way to protect yourself against paying additional dividend taxes. Not only can this save you money in taxes, it can also protect the business and save you expensive attorney fees down the road.

Find out how to write your own Division 7A loan agreement and where to find a free template to download.

A Division 7A loan agreement is a legal document required of private companies (Pty Ltd) to prevent them from making tax-exempt profits by distributing funds to their shareholders and associates. Payments, loans and canceled debts are all subject to a Division 7A loan agreement.

Download this Division 7A loan agreement template from Lawpath

You should use a Division 7A loan agreement if you are a private company and want to lend money to a shareholder or partner.

A Division 7A loan agreement can save you money in taxes because without it, payments, loans, and debts incurred by the business would be taxable income for that tax year.

You must use a Division 7A loan agreement for the following:

  • Any type of cash advance
  • Financial assistance or benefit known as granting credit
  • Any type of financial accommodation for shareholders and partners
  • Transfer of funds to a shareholder or his partners
  • Any type of money loan

For a Division 7A loan agreement to be legally binding, it must be compliant and include information relating to the loan of funds.

  • Must be in writing
  • Must use defined terms and definitions (standard legal language)
  • Lender and borrower contact details
  • Exact conditions of the loan agreement
  • Identify the interest rate (benchmark or higher)
  • List the loan conditions
  • Establish the repayment conditions (no more than 7 years unless guaranteed by real estate)

A Division 7A loan agreement is only effective if it is set out in defined legal terms and complies with the provisions of the Australian Tax Office (ATO).

Without a Division 7A loan agreement, your payments, loans, and canceled debts would be treated as a dividend and subject to income tax.

Setting up a Division 7A loan agreement can help you with the following:

  • Protects you from paying additional income taxes
  • Prevents businesses from enjoying tax-exempt benefits
  • Clearly identifies the responsibilities of the lender and the borrower
  • Has tax advantages for the company
  • Less risk of legal and liability issues

When it comes to money, the prudent thing to do is always consult a lawyer. You want to make sure that your Division 7A loan agreement is legally binding and in compliance with the law.

A good place to start and to save you money on attorney fees is to download a free template of a Division 7A loan agreement. Fill it out, date and sign it and have a lawyer review it.

Before you start, do some research online and go to sites like the ATO and read the Division 7A loan agreements. From there, you’ll have a good idea of ​​what to expect, so when you download your free Division 7A model, it will make more sense.

Then you need to sit down with all parties involved and write up the terms and conditions of the loan agreement, making sure it is 7A compliant. After that, take the document to a lawyer to see if there are any errors or omissions.

There are a number of free online templates available for Division 7A loan agreements and some allow you to view the document, including:

  • Right path. Lawpath is an online legal resource for small businesses and entrepreneurs. You can view sample legal document templates for free, but there is a fee to access downloads and customizable options.
  • Legal Vision. For a monthly LegalVision subscription of $ 199, you will have unlimited access to free downloads of legal document templates (including the Division 7A Loan Agreement).
  • Cleardocs. Cleardocs is a division of Thomson Reuters that offers hundreds of legal and business document templates for download for a one-time fee. The Division 7A loan agreement template is available for download for $ 93.50.


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