Division 7A Loan Agreement

About Product

This is a special purpose loan agreement between a company and its shareholders. The agreement ensures that any payment is not treated as a dividend under Division 7A of the Income Tax Assessment Act 1936.

► $129.00 (inc GST) - OR provided under your unlimited membership

► The master document has been signed off by Abbott & Mourly and is congruent with Australian law.

General Information

The LightYear Docs Division 7A Loan Agreement meets with the ATO guidelines in relation to a loan agreement between shareholders and the company.

Benefits

A choice of personal loans up to 7 years. No mortgage required.
Personal loans beyond 7 years and up to a maximum of 25 years requiring a mortgage deed can be included as part of the Division 7A Loan Agreement package.

Frequently Asked Questions

Who can be the Lender and the Borrower?

The Lender is a company or trust in certain circumstances and the Borrower is a shareholder of the company who has been paid an amount by the company. To ensure that the payment is not a deemed a dividend, the Board of Directors of the company may enter into a Division 7A Loan Agreement.

What is the interest rate?

The interest rate of the loan for each year after the year in which the loan was made, must be greater than or equal to the benchmark interest rate for each year.

The Division 7A - benchmark interest rates are published annually by the ATO. For 2020-2021 the published ATO interest rate is 4.52%, as is the 2021-2022 interest rate.

What happens on the death of Lender or Borrower?

If the Borrower dies, assuming that they are individuals, the deceased’s estate will take over the responsibilities of Borrower. It should be noted that death is a termination event under the Loan Agreement.

Will Trust payments be caught under Division 7A?

Division 7A applies to certain payments made by trustees to a shareholder or an associate of a shareholder of a private company, where the company is presently entitled to an amount from the net income of the trust estate and the whole of that amount has not been paid by a specified date. However, it is important to note the rules do not apply in all cases where there is an unpaid present entitlement.

Can the Loan Agreement be used for a SMSF LRBA?

The loan agreement cannot be used as a related party loan for a SMSF LRBA. Advisers should use The LightYear Docs RPA – Related Party LRBA meeting ATO guideline – PCG 2016/5 RRPL, which has the following ten documents compiled into one process:

A Product Disclosure Statement.
The Commissioner’s guideline PCG 2016/5 as a reference for compliance purposes.
Trustee minutes upgrading the deed and authorising the acquisition of a single acquirable asset under a Holding Trust.
SMSF Deed Upgrade plus minutes.
Investment Strategy covering asset and loan.
Holding Trust establishment plus minutes.
Related Party Loan.
Mortgage Deed.
Personal Guarantee (optional).
Lease if asset to be used for rental income (optional).

How long does this document take to assemble?

Depending on the complexity of the data, this document should take approximately 15-30 secs to assemble. If you experience timing outside of this please contact Support via the Surge app, alternatively please read this article for troubleshooting tips https://info.lightyeardocs.com.au/supportcentre/troubleshooting-longer-assembly-times-timeouts .

Is this document a legal document?

All master documents have been signed off by Abbott & Mourly lawyers. Tony Anamourlis of Abbott & Mourly advises that “at no time, due to inbuilt legal protection and security measures can a user change or amend a document on the LightYear Docs platform that has been signed off by a practicing solicitor. To do so would result in the user drafting a document of a legal nature and engaging in the provision of legal services. In addition, it would be a breach of copyright. In our opinion when completing the form fields through the LightYear Docs platform, users and their employees are merely carrying out an administrative task which is not the provision of legal advice.”

However in some complex areas such as the insertion of a varied range of client instructions into a Will or other such documents the user must be mindful of the extent to which a document is being drafted by the user rather than merely the administrative task of completing a form where the relevant fields are inserted into the reviewed and signed legal document provided by Abbott & Mourly.

The above advice is born out of numerous cases dating back to Re Sanderson, Ex parte Law Institute of Victoria [1927] VLR 394, 397 where the Court held:

“if a person does a thing usually done by a solicitor, and does it in such a way as to lead to the reasonable inference that he is a solicitor – if he combines professing to be a solicitor with action usually taken by a solicitor – I think he then does act as a solicitor.”

Likewise in ACCC v Murray (2002) 121 FCR 428, 448 where Murray was building a franchise business that involved the legal writing and drafting of Wills from scratch based on the client’s personal circumstances. The Court held that this process was legal work.

Is the document easy to read?

All LightYear Docs products are written in plain English and assessed for readability. If at any time you come across any errors, please contact support@lightyeardocs.com.au.

What lawyers sign off on the LightYear Docs documents?

All LightYear documents are prepared and signed off by Abbott & Mourly from Melbourne, Sydney and Brisbane.

Are the LightYear Docs documents reviewed regularly?

All LightYear Docs documents form part of the LightYear Docs internal review process. We review all documents at least annually or when required to do so due to changes in legislation. Further details of this process and a review schedule is include on this website.

Can I get a sample of this document?

Yes, please email support@lightyeardocs.com.au to request a sample document for you to review.