Division 7A Loan Calculator — Australia 2026-27
Working out Division 7A loan requirements for your private company.
Calculate minimum annual repayments for Div 7A loans from private companies to shareholders or associates. Uses 2026-27 ATO benchmark rate.
Estimates only. Verify with your tax adviser.
📐 How it worksHow Division 7A minimum repayments are calculated
The Division 7A formula
The ATO minimum annual repayment is calculated using the standard loan amortisation formula: PMT = P × r × (1+r)^n / ((1+r)^n − 1), where P is the loan balance, r is the benchmark interest rate per year, and n is the remaining term in years.
2026-27 ATO benchmark rate: 8.77%
The ATO publishes the benchmark interest rate each year. For 2026-27 it is 8.77%. For 2025-26 it was 8.37%. The rate is based on the indicator lending rate published by the RBA for banks providing standard variable housing loans. Loans entered into before the rate is published must use the rate applicable at the time the agreement was entered into.
Loan term maximums
Unsecured loans: maximum 7 years. These are the most common Div 7A loans. Secured loans (where the borrower grants a registered mortgage over real property, typically their principal place of residence): maximum 25 years. The longer term dramatically reduces the minimum annual repayment but increases total interest paid.
What counts as a repayment
Repayments must be made before 30 June each income year. Both the principal and interest must be repaid; interest-only payments do not satisfy the minimum repayment requirement. Repayments can be cash, or can be set-off against entitlements owed by the company to the borrower (e.g. a salary or dividend). Get tax advice on valid set-off arrangements.
📋 Repayment tableYear-by-year amortisation schedule
The table below shows year-by-year repayments based on your current inputs. Each row shows the minimum repayment, the split between interest and principal, and the remaining balance.
💡 Tax tipsDivision 7A planning tips
Use a 25-year secured loan to reduce cash flow pressure
A $200,000 loan at 8.77% over 7 years requires ~$39,500/yr in repayments. The same loan secured by a PPOR mortgage over 25 years requires only ~$20,600/yr — a substantial cash flow difference. However, total interest paid over 25 years is much higher. Model both options.
Set off dividends against repayments
A common strategy is to declare a franked dividend from the company each year and set off that dividend entitlement against the minimum Div 7A repayment obligation. If the dividend amount equals or exceeds the minimum repayment, no cash changes hands. Get advice on documentation requirements.
Don’t miss the 30 June deadline
The minimum repayment must be made by 30 June of the income year. If it is not, the shortfall is treated as an unfranked deemed dividend, included in the shareholder’s assessable income for that year, and subject to their full marginal tax rate with no franking credit offset. This is a harsh consequence — set calendar reminders.
Refinancing an existing Div 7A loan
You can replace a Div 7A loan with a new complying loan agreement. The new loan uses the current benchmark rate and remaining balance. This can increase or decrease repayments depending on rate movements. Get tax advice as the refinancing must be properly documented.
❓ FAQFrequently asked questions
What is Division 7A in Australia?
Division 7A of the Income Tax Assessment Act 1936 prevents private company owners from accessing company profits tax-free as loans, payments, or debt forgiveness to shareholders or their associates. Any such loan must be under a complying written agreement and meet minimum annual repayments at the ATO benchmark rate — or it is treated as an unfranked deemed dividend assessable to the shareholder.
What is the Division 7A interest rate for 2026-27?
The ATO benchmark interest rate for 2026-27 is 8.77%. For 2025-26 it was 8.37%. The rate is set by the ATO each financial year and is based on the RBA’s indicator lending rate for housing. A complying loan agreement must specify that interest is charged at no less than the benchmark rate.
What are the maximum loan terms?
Unsecured loans: maximum 7 years. This is the default and most common type. Secured loans (registered mortgage over real property, typically the borrower’s PPOR): maximum 25 years. The loan agreement must be in writing, signed before the company’s lodgment day, and must specify the term and interest rate.
What happens if you miss a minimum repayment?
If the minimum annual repayment is not made by 30 June, the shortfall is treated as an unfranked deemed dividend paid to the shareholder. It is included in their assessable income for that year at their marginal tax rate, with no franking credit offset. The outstanding loan balance is not reduced, and repayments must continue in future years based on the original schedule.
Can you repay more than the minimum?
Yes. You can repay any amount above the minimum. Extra repayments reduce the outstanding balance, which reduces future minimum repayments. There is no penalty for early repayment. If the loan is fully repaid, it ceases to be a Div 7A loan.
Do Div 7A rules apply to trusts?
Yes. Division 7A applies to loans made by a private company to a trust where a shareholder or associate of the shareholder is a beneficiary. The trust must make minimum repayments or the unpaid amount is treated as a deemed dividend to the relevant shareholder. The rules around trusts and Div 7A are complex — always get specialist tax advice.
Three inputs drive your minimum repayment. Understanding each helps you plan effectively.
The larger the outstanding balance, the higher the minimum repayment. Reducing the balance with extra repayments reduces future obligations.
The ATO benchmark rate changes annually. A higher rate increases the minimum repayment. The 2026-27 rate is 8.77% — up from 8.37% in 2025-26.
A longer term reduces the annual repayment amount but increases total interest paid. Secured loans (25yr) have substantially lower annual repayments than unsecured (7yr).
A 1% increase in the benchmark rate on a $100k 7-year loan increases the annual repayment by approximately $380. On a 25-year secured loan, the same 1% increase adds about $700 per year.
Div 7A is an area of frequent ATO audit attention. The compliance requirements are strict.
The loan must be documented in a written agreement signed before the company’s tax lodgment day for the year the loan was made. Verbal or informal arrangements are not complying loans.
The minimum repayment must be made by 30 June. There is no grace period. A shortfall, even by one dollar, triggers a deemed dividend for the entire shortfall amount.
Common planning involves setting off a company dividend against the repayment obligation. This must be properly documented as a separate dividend declaration with the repayment set-off recorded in board minutes.
Division 7A is complex. The ATO has a sophisticated detection program and penalties for non-compliance are significant. Always use a tax adviser experienced in private company tax planning for any Div 7A loan arrangement.
Once you know your minimum repayment, these are the natural next steps.
Decide whether you’ll repay from personal cash, salary, or a dividend set-off. Each has different tax implications. Model the dividend set-off option using the Dividend Tax calculator.
Missing the repayment deadline is costly. Set a calendar reminder at least 30 days before 30 June to confirm the repayment has been made and documented.
The ATO benchmark rate changes each year, usually announced in early July. Check the updated rate after 1 July and recalculate your obligation for the new income year.