Div 7A Loan Calculator
Minimum yearly repayment on a Division 7A loan for 2026–27 at the 8.77% benchmark rate, with the interest and principal split, shortfall and full schedule.
Minimum yearly repayment
$19,715.97The minimum yearly repayment on a $100,000 Division 7A loan with 7 years of a 7-year term remaining is $19,715.97 in 2026–27: $8,770.00 interest at the 8.77% benchmark rate and $10,945.97 principal, due by 30 June.
| Benchmark interest rate 2026–27 | 8.77% |
|---|---|
| Years remaining | 7 |
| Interest component | $8,770.00 |
| Principal component | $10,945.97 |
| Minimum yearly repayment | $19,715.97 |
Repayment schedule at 8.77%
| Year | Opening | Interest | Principal | Repayment | Closing |
|---|---|---|---|---|---|
| 1 | $100,000 | $8,770 | $10,946 | $19,716 | $89,054 |
| 2 | $89,054 | $7,810 | $11,906 | $19,716 | $77,148 |
| 3 | $77,148 | $6,766 | $12,950 | $19,716 | $64,198 |
| 4 | $64,198 | $5,630 | $14,086 | $19,716 | $50,112 |
| 5 | $50,112 | $4,395 | $15,321 | $19,716 | $34,791 |
| 6 | $34,791 | $3,051 | $16,665 | $19,716 | $18,126 |
| 7 | $18,126 | $1,590 | $18,126 | $19,716 | $0 |
How this was calculated
| Loan balance at 1 July | $100,000.00 |
|---|---|
| Benchmark interest rate for 2026–27: 8.77%interest component = 100,000 × 8.77% | $8,770.00 |
| Minimum yearly repayment over the 7 remaining years100,000 × 0.0877 ÷ (1 − (1 + 0.0877)^−7) | $19,715.97 |
| Principal component | $10,945.97 |
The ATO recalculates the minimum each year using that year's benchmark rate; the schedule below holds the current rate constant.
The minimum yearly repayment on a $100,000 Division 7A loan with 7 years of a 7-year term remaining is $19,715.97 in 2026–27: $8,770.00 interest at the 8.77% benchmark rate and $10,945.97 principal, due by 30 June.
Source: ATO Last verified How we keep this accurate
What Division 7A requires
When a private company lends money to a shareholder or their associate, Division 7A of the Income Tax Assessment Act 1936 treats the loan as an unfranked dividend unless it is put under a complying written loan agreement before the company’s lodgment day. A complying loan must charge at least the benchmark interest rate, run for no more than 7 years (25 years if the whole loan is secured by a registered mortgage over real property worth, after prior-ranking liabilities, at least 110% of the loan) and receive a minimum yearly repayment every income year after the year it was made. Miss the minimum and the shortfall is a deemed dividend in that year.
The formula
The minimum yearly repayment is the amount that would repay the balance at the start of the year, with interest at the current benchmark rate, in equal instalments over the years remaining:
MYR = balance × r ÷ (1 − (1 + r)⁻ⁿ)
where r is the benchmark rate and n the remaining years. Because the ATO recalculates every year with that year’s rate, the repayment changes whenever the benchmark moves. The benchmark rate is set from the RBA’s standard variable owner-occupier housing rate last published before the income year starts: 8.77% for 2026–27, up from 8.37% in 2025–26 and 8.77% in 2024–25.
Worked example
A $100,000 unsecured loan made in 2025–26 with a 7-year term: the first minimum repayment, due by 30 June 2027, is $100,000 × 0.0877 ÷ (1 − 1.0877⁻⁷) = $19,715.97, of which $8,770 is interest and $10,945.97 principal. If the shareholder repays $10,000 by 30 June, the $9,715.97 shortfall is a deemed dividend. Repayments can be made in cash or by setting off a declared dividend against the loan, which is the common approach.
Frequently asked questions
What is the Division 7A benchmark interest rate for 2026–27?
8.77%, published by the ATO in June 2026 from the RBA’s standard variable owner-occupier housing rate. It applies to the minimum yearly repayment calculation for every complying Division 7A loan in the 2026–27 income year, whichever year the loan was made, and to interest charged on new loans. The 2025–26 rate was 8.37%.
How is the minimum yearly repayment worked out?
The balance at the start of the income year is amortised over the years remaining in the term at the current benchmark rate, using the standard loan formula: balance × r ÷ (1 − (1 + r)⁻ⁿ). On $100,000 with seven years left at 8.77% that is $19,715.97. The ATO’s Division 7A calculator produces the same figure and also splits interest from principal.
When is the first repayment due on a Division 7A loan?
By 30 June of the income year after the year the loan was made. A loan made in June 2026 needs its first minimum repayment by 30 June 2027; a loan made in July 2026 has until 30 June 2028. No repayment is needed in the year the loan is made, but the written agreement must be in place before the company’s lodgment day for that year.
Can a dividend be used to make the repayment?
Yes. The usual approach is for the company to declare a franked dividend to the shareholder and set it off against the loan, so no cash changes hands. The dividend is assessable to the shareholder (with the franking credit) and the loan balance falls by the amount of the dividend set off, not the grossed-up amount. The interest component is assessable income of the company.
What happens if the minimum repayment is not made?
The shortfall between the minimum yearly repayment and the amount actually repaid is treated as an unfranked dividend to the shareholder in that year, taxable at their marginal rate with no franking credit. The Commissioner can disregard the shortfall or allow a franked dividend if it was an honest mistake and corrective action is taken, which requires an application.
Can the 7-year term be extended to 25 years?
Only if the whole loan is secured by a registered mortgage over real property and the property’s market value, less liabilities secured ahead of the loan, is at least 110% of the loan, with the security in place from the start. An unsecured loan cannot later be converted to a 25-year term. The Treasury proposal to move to a single 10-year term has not been legislated.
Sources and assumptions
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