Distributable Surplus Calculator

Distributable Surplus Formula

The distributable surplus calculator works out the amount available to limit a company’s potential Division 7A dividends. It uses the statutory inputs you supply, then reduces each potential dividend proportionally when their total exceeds that amount.

The formula adds Division 7A amounts to net assets. It then subtracts non-commercial loans, paid-up share value and repayments of non-commercial loans. The live result names each component and shows the arithmetic.

Net assets have their own statutory meaning. Start with year-end accounting assets, apply any supported asset value adjustment, then subtract present legal obligations and eligible provisions. If this leaves a deficit, statutory net assets are zero before the remaining formula applies.

The Income Tax Assessment Act 1936, section 109Y defines these amounts and the proportional reduction. Retained profits alone do not provide the statutory inputs. Additional accounting provisions can reduce retained profits without reducing statutory net assets.

Enter the Statutory Adjustments

Enter the year-end accounting assets separately from any asset value adjustment. A positive adjustment increases assets and a negative adjustment reduces them. The calculator records the starting figures and adjustment separately in the workpaper.

Identify present legal obligations owed to other parties. Include eligible provisions only once, without also counting them as obligations. Section 109Y specifies depreciation, annual and long service leave, amortisation of intellectual property and trade marks, and any other prescribed provisions.

The Commissioner can substitute appropriate asset or provision values when the accounting records materially understate or overstate them. The adjustment field records your supplied asset adjustment. The calculator does not decide whether a valuation or provision qualifies.

Division 7A amounts are the year’s amounts under sections 109C and 109F before this surplus limit. They are added back in the formula. The separate potential-dividend rows must include all amounts subject to the company-wide cap, including relevant loan amounts.

Prior deemed loans is the shorter input label for statutory non-commercial loans. Include qualifying earlier-year dividends under former section 108 or sections 109D and 109E still recorded as assets. Include the specified section 109XB amounts after any reduction required by section 109Y(2A).

Paid-up share value is the company’s paid-up share capital at year end. Prior-loan repayments covers eligible repayments and set-offs of loans previously treated as dividends. Exclude the specified unfranked-dividend set-offs and loan forgiveness set-offs under the statutory definition.

Incorrect: enter every shareholder loan balance as a non-commercial loan deduction. Correct: enter only amounts meeting the statutory definition. Your transaction review establishes that classification before you enter the figures.

All entered financial information stays on this page in your browser. The calculator sends none of these amounts to Tax Genie or the ATO and saves none in browser storage.

A Worked Surplus Calculation

This fictional company has accounting assets of $460,000, legal obligations of $310,000 and eligible provisions of $40,000. The starting difference is $110,000. A supported $10,000 asset adjustment gives statutory net assets of $120,000.

Add $30,000 of Division 7A amounts. Deduct $15,000 of non-commercial loans, $10,000 of paid-up share value and $5,000 of eligible prior-loan repayments. The distributable surplus calculation is $120,000 + $30,000 - $15,000 - $10,000 - $5,000 = $120,000.

Two separately assessed potential dividends are $100,000 and $80,000. Their $180,000 total exceeds the $120,000 surplus. Each keeps 66.67% of its original amount, displayed to two decimal places. The resulting rows show $66,666.67 and $53,333.33.

For a nil-surplus case, change paid-up share value to $150,000 while retaining the other figures. The raw formula becomes negative $20,000. The available surplus and deemed-dividend cap both show $0, and each dividend row shows $0.00.

A negative result cannot create a negative dividend. The calculator retains the signed formula result in the arithmetic and workpaper, while applying zero as the available cap.

Read the Deemed-Dividend Limit

The deemed-dividend cap is the smaller of available surplus and total potential dividends. When potential dividends exceed surplus, each reduced amount equals its original amount multiplied by surplus, divided by the total potential dividends.

For example, $500 multiplied by $900 of surplus and divided by $1,000 of total potential dividends gives $450. The ATO distributable-surplus guidance explains this proportional limit and why retained earnings can differ from surplus.

When surplus equals or exceeds the potential-dividend total, the calculator keeps each potential amount unchanged. A zero potential-dividend total produces a zero cap without dividing by zero.

The headline and totals show whole dollars. The dividend rows show cents for workpaper comparison. Calculations retain exact cent-based ratios until rounding each row. Independently rounded rows can differ from the cap by cents.

Download the CSV workpaper to retain the inputs, component calculation and dividend allocations. The file includes plain-number amounts and each exact allocation fraction. Keep it with the supporting accounts and your classification assessment.

Section 109Y requires the company to provide a written statement when it reduces a deemed dividend. The statement records distributable surplus and total provisional dividends. A calculation workpaper does not replace that statement.

The cap limits an exposure you have assessed separately. It does not determine whether a payment, loan or forgiven debt creates a deemed dividend. Use the Division 7A guide for that transaction review before applying the cap.