You should seek legal advice, as the position can be quite complex. Typically people enter into Division 7A compliant loan agreements where they have borrowed money from the company they are a shareholder in (including where the company has made payments on their behalf).
If the Company has provided you with a loan or other financial accommodation in any financial year – you will typically need to enter into the loan agreement by the earlier of:
The main difference is the requirement for security.
A 7-year Division 7A compliant loan does not need to be secured but has to be repaid in 7 years.
A 25-year Division 7A compliant loan needs to be secured by a registered mortgage over real property. There is also a requirement that the net equity in the real property is at least 110% of the amount of the loan. If these requirements are satisfied, the loan can be repaid over 25 years.
Loans and facilities can vary significantly between different arrangements.
At a minimum, you will normally need to confirm the following concepts:
However, depending on the arrangement you are trying to document, there can be a number of other concepts you may need to consider such as Division 7A or any laws relating to superannuation funds.
In Queensland a party has 6 years to bring a claim from the date on which the cause of action arose.
For a loan, the cause of action will usually arise when an amount is due to be repaid but it has not been.
While this rule is applicable to all loans if you plan on having an interest free loan which is payable on demand, you should be mindful that the 6 year period begins at the time the loan is advanced.
If the loan is not repaid before the 6 year period elapses, then the lender may have difficulties bringing a claim against the borrower to try recover the loan.
In this type of scenario, parties often acknowledge the debt in writing, which if done correctly, can re-set the 6 year period.
CGW Structures offers a comprehensive range of services to support the preparation and management of loan and facility agreements for businesses, trusts, SMSFs and individuals. Our solutions are designed to help you document lending arrangements clearly and compliantly, whether you need a straightforward loan agreement or more complex facility documentation.
We provide customisable templates for a variety of loan and facility agreements, including Division 7A compliant loan agreements for private companies. These documents are essential for ensuring loans between companies and their shareholders or associates meet Australian Taxation Office (ATO) requirements and avoid unintended tax consequences. Our templates are regularly updated to reflect the latest legislative changes and best practice, giving you confidence that your agreements are current and reliable.
In addition to Division 7A loan agreements, CGW Structures offers templates for loan arrangements. Our streamlined processes and electronic delivery make it easy to access and complete the documents you need, saving you time and reducing administrative burden.
While CGW Structures does not provide legal advice, our allied law firm Cooper Grace Ward ensures that all templates are quality assured and kept up to date with the latest legal developments. If you require tailored legal advice or bespoke loan documentation, Cooper Grace Ward’s experienced lawyers are available to assist.
Choose CGW Structures for efficient, compliant and easy-to-use loan and facility agreement solutions. Our team is committed to supporting your business and personal finance needs with reliable documentation and ongoing support.
Contact the CGW Structures team to learn more about our loan and facility agreement services and how we can help you document your lending arrangements with confidence.
