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Division 7A loan repayments
Published on 01 Aug 21 by "THE TAX SPECIALIST" JOURNAL ARTICLE
Almost all minimum annual repayments under complying Div 7A loan agreements are made without transferring money. They are typically made by way of set-off against a dividend declared by the company, or purportedly made via a round-robin of payments. This article addresses the requirements to make a legally effective repayment by way of set-off. Where a repayment is not effective, the minimum annual repayment has not in fact been made, resulting in a deemed dividend. The article also considers common Div 7A circumstances where the particular structure does not naturally provide for making repayments by way of set-off, and the effectiveness of purported round-robin payment arrangements by journal entry. These are fundamental issues that practitioners
encounter when assisting their clients to comply with Div 7A. In addition, there are broader tax, corporate and commercial issues, and risks that arise, for both clients and practitioners. The article is written on the basis of an assumed level of Div 7A knowledge, and thus does not cover every relevant technical point.
Author profile
David Montani CTA
David Montani, CTA, is National Head of Technical Tax – Private Enterprise at Grant Thornton. He has over 30 years’ experience, with over 20 of those in specialist tax advisory. In his role with GT, David delivers practical tax training, mentors staff, provides tax technical support on significant client engagements, and assists with quality and excellence protocols. - Current at 13 November 2025
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