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Division 7A Loan Agreements including a Free Sample

 

A loan agreement is an agreement between two parties whereby one party agrees to provide a loan to the other party

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Division 7A Loan Agreements

Division 7A Loan Agreements + Free Samples includes documents regarding borrowing money from a private company which can have serious pitfalls if not done correctly. Directors and shareholders often borrow money from their companies. Care must be taken so that the ATO does not deem these loans to be dividends, and tax them accordingly.

Division 7A of the Income Tax Assessment Act 1936 requires such loans to be ‘arm’s length’. The rules are stringent and require a special type of loan agreement known as a Division 7A loan agreement.

The Income Tax Assessment Act 1936 is aimed at preventing private companies from making tax-free distributions of profits to shareholders (or their associates) in the form of loans.  Unless the loan comes within specified exclusions in Division 7A it is treated as an assessable dividend and taxed as a dividend.

Division 7A Loan Agreement

Agreement from company to shareholders that satisfies requirements of a loan under Division 7A of the income Tax Assessment Act 1936.  Includes:

  • Definitions
  • Interpretation
  • Advances
  • Interest
  • Term
  • Repayment
  • Yearly repayments
  • Statutory minimum repayments
  • Payments affected by the Act
  • Early repayment
  • Guarantee

Agreement is Suitable for secured and unsecured loans.  Most of the variables are in a Schedule to the agreement for ease of drafting.

 12 pages long.

 

 

 

 

 

 

 

 

 

 

Company Resolution accepting Division 7A Loan Agreement

Draft minutes of a meeting of the board of a company agreeing to make a loan to a shareholder.  Includes:

  • Resolution to make loan
  • Chair
  • Quorum

Resolution of a company to make a loan to its shareholders/ directors in accordance with Division 7A loan agreement. 1 page

 

 

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