Division 7A Loan Agreement Template and Terms

A Division 7A loan agreement template records the lender, borrower, loan amount, interest and repayment obligations in writing. Use the illustrative clauses below to prepare the client’s agreement, then complete the signing and loan records before the company’s lodgment day.

Division 7A Loan Agreement Template

Copy the schedule and clauses into an editable document, then adapt them to the actual loan. This is an illustrative agreement structure for practice review. Have a lawyer settle provisions for multiple borrowers, trustee liability, security or enforcement before the parties sign.

The Australian Taxation Office (ATO) requires written evidence of the loan amount, binding repayment obligation, interest and term. Its written-agreement determination explains that these terms can appear across several accepted documents. A completed formal agreement puts them together.

Schedule A: Loan Details

Complete the blank cells and attach the advance records before signing. Record monetary amounts in dollars.

Agreement field	Client details
Lender’s full legal name and ACN
Borrower’s full legal name and address
Borrower’s capacity, including trustee capacity where relevant
Loan amount and covered income year
Original advance date or attached dated advance schedule
Repayments already made and amount remaining
Agreed term and maturity date
Interest rate for the income year of the advance
First minimum yearly repayment income year
Repayment account and any agreed instalment dates
Agreement execution date

Illustrative Agreement Clauses

1. The lender and borrower identified in Schedule A agree that the lender’s advances listed in that schedule constitute the loan under this agreement.
2. The borrower acknowledges the recorded loan amount and undertakes to repay it with interest under this agreement.
3. Interest for the income year of the advance is payable at the rate recorded in Schedule A. The Division 7A benchmark interest rate for each later income year determines the interest payable for that year.
4. The borrower must pay at least the minimum yearly repayment calculated under section 109E for each applicable income year. That obligation starts in the income year after the loan is made. Payment must occur by the end of the lender’s applicable income year.
5. The borrower must repay all remaining principal and accrued interest by the maturity date in Schedule A. The agreed term must remain within the maximum permitted by section 109N.
6. Payments must be made to the account in Schedule A. Any agreed instalments must together meet the required annual repayment. The parties must record each payment against the loan.
7. This agreement covers only the advances identified in Schedule A and its attached advance schedule. Additional advances require written terms that identify the amount and applicable repayment obligations.
8. The parties accept these terms by executing the agreement in their recorded capacities. Each signing person must record their name, capacity, signature and actual signing date.

These clauses address the main tax terms. Add the client’s agreed provisions for notices, default and governing law after legal review. Keep the loan’s ordinary contractual rights consistent with its repayment obligations.

Check the Parties and Loan Terms

Use the lender company’s legal identity and the actual borrower’s capacity throughout the agreement. A director signing for the lender is not automatically the borrower. For a trust borrower, identify the trustee and the trust capacity in which the trustee borrows.

Reconcile the amount to the company’s transaction records. Attach the existing advances with their dates and amounts, and identify repayments already made. An old balance needs its original loan history and remaining term. Preparing another agreement does not give it a fresh full term.

If you have not yet decided which transactions need documentation, complete the Division 7A exposure review first. The Division 7A loan guide explains borrower relationships and transaction classification.

Seven-Year and 25-Year Terms

Under section 109N, a loan’s maximum term is seven years unless it meets the secured-loan conditions. A 25-year loan requires a registered mortgage over real property securing the whole loan. When the loan is first made, the property’s market value after prior-ranking secured liabilities must be at least 110% of the loan amount.

For a secured agreement, add the property title particulars and registered mortgage details. Identify the mortgagor if the property owner differs from the borrower. Keep the valuation and prior-ranking debt evidence with the mortgage record. A security clause or personal guarantee alone does not satisfy the registered-mortgage condition.

Have the lawyer prepare the mortgage documents and settle the agreement’s security clauses together. If refinancing an existing loan, apply section 109N’s term adjustments before entering the maturity date. Simply selecting 25 years can overstate the remaining permitted term.

Prepare the Resolution and Signing

Prepare the lender’s approval record and arrange execution by the parties with authority to bind them. A lender resolution or minutes records the company’s decision. It does not, by itself, prove that the borrower accepted the loan terms.

1. Record the lender’s decision. Identify the borrower, loan amount, agreed term and interest basis. Record the proposed security and authorised signers. Address director interests under the company’s constitution and applicable rules.
2. Choose the appropriate approval method. A sole director of a proprietary company can record and sign the decision. Where the circulating-resolution rule applies, all directors entitled to vote sign the resolution. Record meeting decisions in the minutes when the company holds a meeting.
3. Match the agreement’s execution block to each party. Under section 127, company execution without a seal can use two directors, or a director and company secretary. A proprietary company’s sole director can sign if also the sole secretary, or if the company has no secretary. Each individual borrower signs in their own capacity. For trustees, settle the execution requirements for the trustee entity and trust deed.
4. Finish the written terms before the lender’s lodgment day for the income year of the advance. Section 109D defines that day as the earlier of the company’s return due date and actual lodgment date. An early return can therefore bring the deadline forward. Use the official Division 7A legislation to apply the rule to the company’s income year.
5. Keep the executed agreement and its attachments with the loan. Retain the approval record, signing evidence and security documents where applicable. Record actual signing dates. Backdating a signature cannot establish timely acceptance.

The Corporations Act company-document rules cover execution and approval records. Confirm the chosen method fits the company before sending the documents to its signers.

Before closing the job, compare the signed amount and term with the loan record. Confirm every required party accepted the complete terms before the relevant deadline. An unsigned draft or missing borrower capacity requires correction before you treat the documentation as finished.

Tax Genie’s Generated Loan Agreements

Tax Genie generates editable Word loan agreements from the saved loan details, including the cover page and lender’s resolution or minutes. Your practice keeps its own Word templates, so staff start from the practice’s wording and the client’s recorded loan.

Review the generated document against the confirmed parties and advance records. Add the client-specific provisions, and arrange signing through your external signing method. Loan-agreement signing happens outside Tax Genie. Keep the signed copy with the loan in Tax Genie and record the execution date.

The Division 7A software tools keep agreements beside the loan’s yearly schedule and repayment records. Once the signed agreement matches the saved loan, use that record for the next repayment review.