Division 7A (Div 7A) Calculator 2025-26
Calculate minimum yearly repayments for private company loans to shareholders (often searched as a Div 7A calculator). Uses the ATO benchmark interest rate of 8.37% for 2025-26.
Amount borrowed from the private company by shareholder or associate.
Division 7A 2025-26
Benchmark rate: 8.37%
Unsecured term: 7 years
Secured term: 25 years
Minimum repayment due by 30 June each year.
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 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
Important
Even if you repay the shortfall after 30 June, it's still treated as a deemed dividend for that income year. The repayment is then treated as a new loan.
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
Estimates minimum yearly repayments for complying Division 7A loans. It does not determine loan character, distributable surplus limits, or all exceptions.