Division 7A of the Income Tax Assessment Act 1936 treats certain payments, loans, and debt forgiveness by private companies to shareholders or their associates as unfranked dividends. This prevents shareholders from extracting company profits as tax-free loans.

What is the Division 7A benchmark interest rate for 2025-26?

The Division 7A benchmark interest rate for 2025-26 is 8.37%, reduced from 8.77% in 2024-25. This rate is based on the RBA's housing loan variable rate published before the start of the financial year.

What happens if I don't make the minimum repayment?

If you don't make the minimum yearly repayment by 30 June, the shortfall is treated as an unfranked deemed dividend. This amount is added to your assessable income and taxed at your marginal tax rate without any franking credits.

What is the maximum loan term for Division 7A loans?

Unsecured Division 7A loans have a maximum term of 7 years. Secured loans (with a registered mortgage over real property) can have a maximum term of 25 years. Longer terms mean smaller minimum yearly repayments.

Do I need a written loan agreement for Division 7A?

Yes, a complying Division 7A loan must have a written agreement in place before the company's lodgement day for the income year in which the loan was made. The agreement must specify the principal, maximum term, and interest rate.

Division 7A Calculator — 8.37% Benchmark Rate (2025-26)

Calculate the minimum yearly repayment on a private company loan at the 2025-26 ATO benchmark rate of 8.37%. Enter your loan balance to see the full amortisation schedule for 7-year unsecured or 25-year secured Division 7A loans.

Worked examples: $100,000 Division 7A loan, $200,000 Division 7A loan, and $500,000 Division 7A loan.

Supporting guides: current benchmark rate, minimum repayment formula, and lodgment day checklist.

Loan amount

Amount borrowed from the private company by shareholder or associate.

Loan type

Unsecured7 year termSecured25 year term (mortgage over real property)

Financial year (loan start)

Division 7A 2025-26

Benchmark rate: 8.37%
Unsecured term: 7 years
Secured term: 25 years

Minimum repayment due by 30 June each year.

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Enter a loan amount to calculate minimum repayments.

Division 7A applies to loans from private companies to shareholders.

What is Division 7A?

Division 7A of the Income Tax Assessment Act 1936 prevents shareholders of private companies from extracting company profits as tax-free loans. If a private company makes a loan to a shareholder (or their associate) and the loan doesn't meet certain requirements, it's treated as an unfranked deemed dividend.

To avoid this, the loan must either be:

Fully repaid before the company's lodgement day, or
Placed under a complying loan agreement with minimum yearly repayments

Division 7A benchmark interest rates

Financial year	Benchmark rate
2025-26	8.37%
2024-25	8.77%
2023-24	8.27%
2022-23	4.77%
2021-22	4.52%

The benchmark rate is based on the RBA's housing loan variable rate published before the start of the financial year.

Loan requirements

Unsecured loans

Maximum term: 7 years
Interest rate: Benchmark rate (min)
Written agreement: Required
Repayment: By 30 June each year

Secured loans

Maximum term: 25 years
Interest rate: Benchmark rate (min)
Security: Registered mortgage over real property
LVR requirement: Property value ≥ 110% of loan
Repayment: By 30 June each year

Minimum yearly repayment formula

The ATO requires a minimum yearly repayment to be made by 30 June each income year. The formula is a standard loan amortization calculation:

Repayment = Balance × r(1+r)ⁿ / ((1+r)ⁿ - 1)

Where:

Balance = Opening loan balance for the year
r = Benchmark interest rate for that year
n = Remaining years of the loan term

Example: $100,000 unsecured Division 7A loan (2025-26)

Loan amount: $100,000
Loan type: Unsecured (7 year term)
Interest rate: 8.37%

Year 1 minimum repayment: $19,558
Interest component: $8,370
Principal component: $11,188

What happens if you miss a repayment?

If you don't make the minimum yearly repayment by 30 June, the shortfall is treated as an unfranked deemed dividend. This means:

The shortfall is added to your assessable income
You pay tax at your marginal rate (up to 47%)
No franking credits are attached
The loan balance is not reduced by the shortfall

Complying loan agreement requirements

A written loan agreement must:

Be in writing and executed before the company's lodgement day
Specify the principal amount
Specify the term (max 7 years unsecured, 25 years secured)
Specify the interest rate (at least the benchmark rate)
Require minimum yearly repayments by 30 June

For secured loans, the security must be a registered mortgage over real property. The property's market value (less any prior-ranking liabilities) must be at least 110% of the loan amount when the loan is first made.

Exemptions from Division 7A

Division 7A does not apply to:

Loans made in the ordinary course of business on commercial terms
Loans to other companies that are not shareholders
Distributions that are properly franked dividends
Payments that are genuine wages or director's fees
Loans fully repaid before the lodgement day

Frequently asked questions

What is the Division 7A interest rate for 2025-26?

The Division 7A benchmark interest rate for 2025-26 is 8.37%, reduced from 8.77% in 2024-25. This rate must be charged on complying Division 7A loans.

When is the minimum repayment due?

The minimum yearly repayment must be made by 30 June each income year. If you miss this deadline, the shortfall is treated as an unfranked deemed dividend.

Can I pay more than the minimum repayment?

Yes, you can pay more than the minimum repayment at any time. Any excess payment reduces the loan principal, which reduces future minimum repayments and total interest.

What's the difference between secured and unsecured loans?

Secured loans (backed by a registered mortgage) can have a 25-year term, resulting in smaller yearly repayments. Unsecured loans have a maximum 7-year term with larger yearly repayments but less total interest over the loan life.

Do I need to pay interest to the company?

Yes, the interest charged at the benchmark rate is payable to the company. This interest is assessable income for the company (15% tax for base rate entities) but is generally not deductible for the borrower unless the loan was used for income-producing purposes.

Is this an ATO Div 7A calculator?

This calculator applies the Division 7A benchmark rate and minimum repayment method used for complying Division 7A loans. It is an independent tool, not an official ATO calculator. Always confirm your final position with your adviser and ATO guidance.

What if I can't afford the minimum repayment?

If you can't make the minimum repayment, the shortfall becomes a deemed dividend. You may want to consider refinancing, making the loan secured to extend the term, or declaring an actual dividend (which may have franking credits attached).

Tax Accuracy & Sources

Reviewed: March 2026 · Tax year: 2025-26

Estimates minimum yearly repayments for complying Division 7A loans. It does not determine loan character, distributable surplus limits, or all exceptions.