Division 7A Loan Agreement Requirements (2025-26)
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Primary tax-year context: 2025-26
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A Division 7A loan is not compliant just because money moved between accounts.
The agreement terms and timing matter.
Core agreement requirements
A complying agreement should clearly set out:
- borrower and lender details
- principal amount
- interest rate basis (benchmark minimum)
- loan term (7 years unsecured or up to 25 years secured)
- repayment mechanics and due dates
2025-26 benchmark rate
The benchmark interest rate for 2025-26 is 8.37%.
If the agreement uses a lower rate, Division 7A risk increases.
High-risk drafting mistakes
- No executed agreement by lodgment day.
- Missing repayment clauses.
- Security terms that do not support 25-year treatment.
- Informal related-party “loan accounts” with no formal agreement.
Practical control points
- Use one template per loan type (secured vs unsecured).
- Record annual rate updates in working papers.
- Reconcile loan account and repayment evidence each quarter.
You can then use the Division 7A calculator to check whether repayments match agreement settings.