What is a Division 7A loan?

A Division 7A loan is a loan from a private company to a shareholder or their associate that complies with Division 7A of the Income Tax Assessment Act 1936. A complying loan agreement must be in writing, charge interest at or above the ATO benchmark rate, and require minimum yearly repayments calculated per s109N. Loans that don't comply are treated as deemed dividends taxable in the hands of the shareholder.

What is the Division 7A benchmark rate for FY26?

The Division 7A benchmark rate for each year of income is published by the ATO annually around May or June. The rate is the RBA Indicator Lending Rate for bank variable housing loans (Standard) as published in May of the year before the year of income. The calculator above defaults to 8.27% — confirm the current published rate at ato.gov.au before relying on the output for compliance reporting.

What's the difference between a secured and unsecured Division 7A loan?

A Division 7A loan secured by a registered mortgage over real property is allowed a maximum 25-year term; an unsecured loan is capped at 7 years. The longer term smooths the minimum yearly repayment substantially — on a $500,000 loan at 8.27%, the secured 25-year MYR is approximately $48,000 vs the unsecured 7-year MYR of approximately $97,000. The trade-off is that securing the loan requires registering a mortgage, which has its own costs and complications.

What happens if I miss the minimum yearly repayment?

If the minimum yearly repayment is not met by 30 June of the test year, the shortfall is treated as a deemed dividend — assessable income to the shareholder, taxed at marginal rates. The deemed dividend is generally not frankable, so there's no franking credit offset. Late repayment after 30 June does not cure the shortfall — the deemed dividend is locked in for that year. Section 109RB allows discretionary relief in some circumstances (honest mistake or inadvertent omission) but it is not automatic.

Can I refinance a Division 7A loan?

Yes, but the refinancing arrangement itself must comply with Division 7A. A common path is to refinance the company loan with a commercial mortgage from a bank — the company is paid out by the borrower's commercial loan, the borrower then services the bank loan at commercial rates. We work on this side of the file: matching the borrower to a lender that will write the commercial refinance given the file shape. The tax structuring of the refinance itself stays with your accountant.

Is Esteb & Co qualified to give Division 7A advice?

No. Esteb & Co Pty Ltd is a licensed mortgage broker (Credit Representative #574070 under Connective's Australian Credit Licence #389328) — regulated under the National Consumer Credit Protection Act (NCCP). Division 7A advice is taxation advice, regulated under the Tax Agent Services Act and requires registration with the Tax Practitioners Board. The calculator on this page implements the ATO published formula as a tool; the structuring decision (loan vs dividend, secured vs unsecured, repayment cadence) should be made in consultation with your registered tax agent or accountant. We work with accountants on the borrowing-side of any property-backed refinance that arises from a Div 7A arrangement.

Division 7A loan calculator.

Name: Division 7A Loan Calculator
Author: Richard Esteb

ATO-compliant minimum yearly repayment, year-by-year amortisation, and the deemed-dividend cliff if you miss it. The maths in 60 seconds — implemented exactly as the ATO publishes it under ITAA 1936 s109N.

Reviewed and updated 18 May 2026 by Richard Esteb, Credit Representative #574071. Calculation method verified against ATO-published worked examples.

New to Division 7A? Read the explainer first →

FY26 benchmark rate (default)

8.27% · year of income 1 Jul 2025 – 30 Jun 2026

Source: ATO — Division 7A benchmark interest rate · underlying reference: RBA Indicator Lending Rates (bank variable housing, Standard) as at May 2025 · statutory basis: ITAA 1936 s109N(2).

Esteb & Co does not publish the benchmark rate — we cite it from the ATO source. The calculator's rate field is editable; before relying on output for compliance reporting, confirm the current value at the ATO link above. See the full benchmark rate history and methodology for FY20–FY26.

What this calculator does

Division 7A of the Income Tax Assessment Act 1936 treats certain loans from a private company to a shareholder or their associate as deemed dividends — unless the loan is documented in a complying agreement and serviced at or above the ATO benchmark rate with minimum yearly repayments (MYR) per section 109N. This calculator applies the s109N formula to your specific loan parameters and surfaces three things accountants actually need:

Year-1 minimum yearly repayment. The amount that must be paid by 30 June of the first test year. Year-2+ recomputes as the balance falls.
Year-by-year amortisation schedule. Principal and interest split per year. Useful to attach to client file notes.
The deemed-dividend cliff. What happens if the MYR isn't met — taxed as assessable income, generally not frankable.

The s109N formula

For each test year, the MYR is the standard amortisation formula applied to the start-of-year balance, the year's benchmark rate, and the remaining term:

MYR = TY × r × (1 + r)^n / ((1 + r)^n − 1)

  TY = balance at start of test year
  r  = ATO benchmark rate that year (decimal)
  n  = remaining term in years

The benchmark rate changes each year of income — it's the RBA Indicator Lending Rate (bank variable housing — Standard) as at May of the year before the income year. So each test year recalculates against a (potentially) different rate.

Secured (25y) vs unsecured (7y) — why it matters

The two paths produce very different cashflow profiles. On a $500,000 loan at 8.27%:

Unsecured (7 year term): Year-1 MYR ≈ $96,800. Total interest over 7 years ≈ $177,600.
Secured (25 year term): Year-1 MYR ≈ $47,500. Total interest over 25 years ≈ $688,300.

Secured loans require a registered mortgage over real property — additional cost, additional documentation, restricts what the property can do during the term. The trade-off: 51% lower minimum yearly repayment at the cost of paying ~4× more cumulative interest over a much longer term. Most accountants default to unsecured unless the client genuinely can't service the 7-year MYR — at which point the question becomes whether the loan should exist at all.

What this calculator is NOT

It's an information tool. It computes the formula. It is not:

Tax advice. Whether to take a loan vs declare a dividend, whether s109RB discretion is available if you've already breached, what other CGT or franking consequences apply — those are tax-agent territory. Esteb & Co is a mortgage broker, not a registered tax agent.
Personal financial advice. The output is general in nature. Your specific circumstances may change the answer.
A substitute for the ATO published guidance. If you're computing for compliance reporting, confirm the benchmark rate against ato.gov.au — the calculator default is correct at the time of last review but the ATO publishes annually.

Where Esteb & Co fits. Many Div 7A arrangements eventually need a commercial property refinance to retire the company loan — the company is paid out by a bank commercial loan, the shareholder services the bank loan at commercial rates instead. We work that side: matching the file to a lender that will write the commercial refinance given the structure your accountant has set up. The Div 7A structuring itself stays with your accountant.

What's next

Two pieces sit alongside this calculator:

The Div 7A pillar — /division-7a/ explainer covering when Div 7A applies, the deemed-dividend trap, the loan-vs-dividend choice, and the broker boundary.
The compliant agreement template — /division-7a/loan-agreement/ downloadable Word/PDF template (clause-by-clause). Accountants share this with clients.

— Richard Esteb · Esteb & Co Pty Ltd · Credit Representative #574070 · ACN 681 636 056 · MFAA #937494