Business tax
Took money out of your company? See what it could cost before the deadline
Money you take out of your own company is either a complying loan or a dividend. There is no middle ground. The minimum yearly repayment is a set figure due by a set date, and missing it turns the shortfall into a dividend taxed at up to 47%, with no franking credit.
Money from your own company is a complying loan, or it is taxed as income.
Under Division 7A, money a shareholder or an associate takes out of a private company is treated as a dividend. The way out is to repay it, or put it on a written complying loan agreement, before the company's lodgment day. After that, the minimum yearly repayment has to actually reach the company by 30 June each year.
The benchmark interest rate for 2026-27 is 8.77%, up from 8.37% the year before. The minimum repayment is worked out on that rate, so it moves every year, even when nothing about the loan has changed.
On a $200,000 unsecured loan over the 7 years maximum term, the minimum yearly repayment is $39,432. Miss it and the shortfall becomes a deemed dividend: assessable income, usually with no franking credit, taxed at your marginal rate of up to 47%. Paying it later does not undo it.
The company has already paid tax on that profit at 25% or 30%. A deemed dividend ignores it, so the same money is taxed twice.
What the Division 7A calculator works out for you
- Your minimum yearly repayment, at the 2026-27 benchmark rate of 8.77%, on your loan, its term and what is left of it.
- Unsecured over 7 years against secured over 25 years, with the 110% security cover test applied. The longer term roughly halves the yearly repayment.
- The deemed dividend, priced. Not "you might have a problem", but the tax on it, plus shortfall interest at 7.43% a year.
- The penalty range. Administrative penalties run from 25% to 75% of the shortfall, depending on how the position came about.
- Every lawful way out, ranked. Repay it, put it on a complying loan, declare a franked dividend, pay a salary, or leave it and wear the deemed dividend. Each one priced on the tax and charges it causes, in today's dollars.
- Unpaid trust distributions. Since the High Court's Bendel decision on 10 June 2026, an unpaid entitlement is not by itself a loan. The calculator shows what it would cost if it is turned into one.
What the full report adds
- Every route priced to the dollar and ranked, cheapest first. The free result names them. The report tells you which one costs least on your figures, and by how much.
- The whole loan term, year by year. Balance, interest and repayment for every income year, and what a benchmark rate rise would do to each one.
- The split between a franked dividend and a loan that costs least on your income, and whether a change in your income would change which route wins.
- Every loan and every company, as many times as you like. One payment, no expiry.
What it will not do: give tax advice
It is not tax advice. Whether an amount is a loan, a payment, a forgiven debt or something else on your facts is a question of characterisation, and Division 7A has exceptions that turn on documents rather than arithmetic. A registered tax agent signs off on the position. What this does is show you what each position costs. At $200 to $350 an hour for an accountant, that is the part worth walking in with.
Everything here runs on the rates and rules current from 1 July 2026, for the 2026-27 income year.
What people ask before they run it
What is the minimum yearly repayment on a Division 7A loan?
It is the least you must repay each year to stop a Division 7A loan turning into a deemed dividend. The formula is in section 109E(6) of the Income Tax Assessment Act 1936 and uses the balance owing at the end of last year, this year's benchmark interest rate (8.77% for 2026-27) and the years left in the term. On a $200,000 loan with seven years to run that is about $39,432 a year. Miss any part of it and only the shortfall becomes a deemed dividend.
What is the Division 7A benchmark interest rate for 2026-27?
8.77%, up from 8.37% in 2025-26. The ATO sets it from the Reserve Bank's standard variable housing loan rate for owner-occupiers, last published before the income year starts. A complying loan has to charge at least that rate for every year after the year the loan was made.
How much tax do you pay on a Division 7A deemed dividend?
You pay tax at your marginal rate, up to 47%, with no franking credit to reduce it, because a deemed dividend is unfrankable under section 202-45 of the Income Tax Assessment Act 1997. Shortfall interest charge at 7.43% a year can be added on the amended assessment, plus an administrative penalty of 25% to 75% of the shortfall. The loan itself still has to be repaid.
Is an unpaid trust distribution to a company a Division 7A loan?
No. On 10 June 2026 the High Court decided in Commissioner of Taxation v Bendel that an unpaid present entitlement owed by a trust to a corporate beneficiary is not, by itself, a loan for section 109D. The ATO accepted that in its decision impact statement of 26 June 2026 and is withdrawing the determination that said otherwise. Other rules still apply, including Subdivision EA and section 100A.
Can I repay my Division 7A loan before 30 June and borrow it again?
No. Section 109R disregards a repayment where, at the time it was made, there was an intention to borrow a similar or larger amount back from the company. A payment on 29 June followed by a drawing on 2 July is the pattern it was written about. It does not stop ordinary business banking, only a repayment made so the year end figure looks right.
Does this Division 7A calculator give tax advice?
No. This is an information service: it applies the published Division 7A rules to the figures you enter and shows what they produce, with every working visible. It ranks options on one stated arithmetic measure and does not recommend one. Whether the cash exists, whether the company has a distributable surplus, and what your own agreements say are not in that measure.
What is Division 7A in simple terms?
Division 7A is a tax rule that treats money a private company pays or lends to a shareholder, or to someone connected to them, as a dividend. Unless it is repaid or put on a written complying loan before the company's lodgment day, it is taxed at the person's marginal rate with no franking credit. It sits in Part III of the Income Tax Assessment Act 1936.
When is the Division 7A deadline?
The main deadline is your company's lodgment day: the earlier of the day its tax return is due and the day it is actually lodged. So lodging early brings the deadline closer. Once a loan is on a complying agreement, each minimum yearly repayment must also reach the company by the last day of the income year, 30 June.
How long can a Division 7A loan be?
A complying Division 7A loan can run for at most 7 years, or 25 years if it is secured by a registered mortgage over real property. For the longer term, the property's value, less any debt secured over it first, must be at least 110% of the loan when the loan is made. Those are the only two terms allowed, and nothing longer.
What happens if I miss a Division 7A minimum yearly repayment?
Only the shortfall becomes a deemed dividend, not the whole loan. If the repayment was $39,432 and $25,000 reached the company, $14,432 is taxed as an unfrankable dividend. The loan carries on, and next year's repayment is worked out on the same balance over one fewer year, so it gets bigger. Sections 109Q and 109RB let the Commissioner help in limited cases.
Can a company just write off a Division 7A loan?
No. Writing the loan off does not make it go away. Section 109F treats a debt that the company forgives for a shareholder or associate as a dividend, for the amount forgiven. The same applies to a debt that is released, waived, or simply not chased until it can no longer be recovered by law. The provision catches the informal versions as well as the formal one.
Is a franked dividend cheaper than a Division 7A loan?
It depends on your income. A franked dividend costs the gap between your tax rate and the company's, so at low incomes it can even refund money. A complying loan costs your marginal rate on the interest only. At the top of the income scale the loan costs less tax, and a mix of the two regularly beats either one on its own.
Everything on Division 7A Calculator
Your estimate is free, and it is a real answer.
Works out the minimum yearly repayment on a complying Division 7A loan at the 2026-27 benchmark interest rate of 8.77%, prices the deemed dividend if that repayment is missed, and ranks every lawful way of dealing with money taken out of a private company on what it leaves the owner.
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