Division 7A Loan Calculator 2026–27
Division 7A Loan Calculator 2026–27
When your company lends money to a shareholder or their associate, Division 7A of the Income Tax Assessment Act 1936 applies — and getting the minimum annual repayment wrong can turn a legitimate loan arrangement into a fully taxable deemed dividend, with no franking credits available. This Division 7A loan calculator works out your minimum yearly repayment, full amortisation schedule and total interest cost for both 7-year unsecured and 25-year secured loans.
Select the income year the loan was made. This matters more than most business owners realise. The ATO benchmark interest rate is locked in for the life of the loan at the rate for the year the loan was first made, so a loan started in 2023–24 stays at 8.27% for its full term even though the current rate is 8.77%. Choosing the wrong year will give you the wrong minimum repayment, and a shortfall is what triggers a deemed dividend.
★★★★★ 83 5-Star Google Reviews | Led by Mina Baselyous, CPA + Chartered Tax Advisor | Registered Tax Agent
Division 7A benchmark interest rates by income year
The benchmark rate that applies to a Division 7A loan is the rate for the income year in which the loan was made, and it does not change for the life of that loan. This is why the calculator asks you to choose the year rather than assuming the current one.
| Income year ended 30 June | Benchmark interest rate |
|---|---|
| 2027 (2026–27, current) | 8.77% |
| 2026 (2025–26) | 8.37% |
| 2025 (2024–25) | 8.77% |
| 2024 (2023–24) | 8.27% |
| 2023 (2022–23) | 4.77% |
| 2022 (2021–22) | 4.52% |
How This Division 7A Calculator Works
This tool applies the standard loan amortisation formula to calculate the Division 7A minimum yearly repayment: PMT = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ – 1), where P is the loan principal, r is the benchmark rate for the year the loan was made, and n is the loan term in years. The result is a fixed annual payment that fully repays the loan, principal plus interest, over the nominated term.
Division 7A loans must be structured as either a 7-year unsecured loan or a 25-year secured loan (secured by a registered first mortgage over real property). The benchmark rate is set by the ATO each year and reflects the RBA indicator lending rate for standard variable owner-occupier housing loans published before the income year starts. If you enter a current year of loan, that year is highlighted in the amortisation table for easy reference. The calculator assumes all prior repayments have been made on time.
What to Do With Your Results
The annual repayment figure shown is the minimum you must pay each income year to keep the loan compliant with Division 7A. Paying more is allowed and reduces your balance faster. Paying less, or nothing, triggers a deemed dividend equal to the shortfall in the year the repayment was due. Deemed dividends are fully assessable income and are not frankable, so there are no franking credits available to offset the tax impact.
This calculator does not account for missed prior-year repayments, whether the company has sufficient distributable surplus, or whether the security arrangement meets ATO requirements for the 25-year term. These variables can significantly affect your real obligations. Read our detailed guide to Division 7A loan repayments for a full explanation of how the rules work, and how to avoid a deemed dividend.
In our experience, a Division 7A loan is rarely an isolated problem. It is usually a symptom of how profits move between the trading company, the trust and the shareholders, which is why we deal with it as part of business advisory in Melbourne rather than as a once a year compliance job. If your loan balance is material, or the same shortfall keeps appearing each year, a tax planning review is the practical next step, and a proactive business accountant in Melbourne should be raising it with you well before 30 June.
Frequently Asked Questions
What is the Division 7A benchmark interest rate for 2026–27?
The ATO benchmark interest rate for Division 7A for the 2026–27 income year is 8.77% per annum, up from 8.37% in 2025–26. It applies to Division 7A loans first made during 2026–27. The rate is set before each income year begins, based on the RBA indicator lending rate for standard variable owner-occupier housing loans last published before the year starts.
Does the benchmark rate change each year on an existing loan?
No, and this is the point most often misunderstood. The benchmark rate is fixed at the rate for the income year in which the loan was made and stays at that rate for the whole term. A loan made in 2022–23 is locked at 4.77% for its full seven years, even though the current rate is 8.77%. Loans made in different years carry different rates, so a company with several Division 7A loans on foot will be running several different rates at once. That is why the calculator asks which year the loan was made, and why the minimum repayment must be worked out loan by loan rather than across the whole balance.
What happens if I miss a minimum yearly repayment?
If you fail to make the minimum yearly repayment by the due date, the shortfall is treated as a deemed dividend in that income year. The deemed dividend is assessable to the shareholder or associate at their marginal tax rate and is not frankable, so no franking credits apply. One missed repayment can create an unexpected and significant tax liability, which is why Division 7A loan management needs to be tracked on a calendar each year rather than picked up at lodgement.
What is the difference between a 7-year and 25-year Division 7A loan?
A 7-year unsecured loan requires no security and must be fully repaid within seven years. It has higher annual repayments but much lower total interest. A 25-year secured loan must be secured by a registered first mortgage over real property and the loan must not exceed 90% of the property’s value. Annual repayments are lower but total interest is far higher. For a $200,000 loan made in 2026–27 at 8.77%, the 7-year option requires roughly $39,400 a year, while the 25-year option is roughly $20,000 a year but costs close to $300,000 in interest across the full term.
Can a Division 7A loan be forgiven or written off?
Yes, but forgiveness triggers a deemed dividend equal to the amount forgiven. If a company releases, forgives, or waives repayment of a Division 7A loan, the forgiven amount is treated as a dividend paid to the shareholder in the income year forgiveness occurs, and that deemed dividend is not frankable. Loan forgiveness can be a legitimate strategy in some circumstances, for example where the recipient has tax losses available, but it must be deliberately planned rather than accidental. Always obtain advice from a registered tax adviser before forgiving any Division 7A amount.
Does Division 7A apply to unpaid present entitlements from a trust?
Yes. Where a trust distributes income to a corporate beneficiary but does not physically pay it, the resulting unpaid present entitlement (UPE) is treated as a financial accommodation under Division 7A. The trust must either place the UPE on complying loan terms, with a written agreement, interest at the benchmark rate and minimum yearly repayments, or actually pay the entitlement to the company. Failure to do so results in the UPE being treated as a loan for Division 7A purposes, with the same deemed dividend consequences if repayments are missed. This is one of the most common Division 7A traps in family trust and corporate beneficiary structures.
General Advice Disclaimer: This calculator provides general information only and does not constitute tax advice. It uses the ATO Division 7A benchmark interest rate for the income year you select, on the basis that the rate is fixed for the life of the loan. Your actual Division 7A obligations will depend on the specific terms of your loan agreement, the company’s distributable surplus, whether prior repayments have been made on time, and other circumstances specific to your situation. Before entering into, modifying, or forgiving a Division 7A loan arrangement, obtain advice from a registered tax adviser. Pinnacle Accounting & Advisory is a registered tax agent and CPA firm advising business owners across Australia.
Ready to do Business with Us?
Join countless small businesses and work with
Australia’s leading Small Businesses Accountants so you can
focus on growing your business – while we take care of the numbers.
Loading posts…