Division 7A Deadline 2026: What Trust and Company Owners Must Check
If your business runs through a company and a family trust, this date matters: 30 June. That’s when Division 7A minimum yearly repayments fall due.
Miss it, and the shortfall isn’t just late. It gets taxed as an unfranked dividend, with no company tax credit attached.
What Division 7A Actually Catches
Division 7A applies when a private company lends money, or effectively lends money, to a shareholder or an associate. Associates commonly include spouses, children, family members, business partners, and trusts or companies the shareholder controls.
The ATO treats these arrangements strictly. Without a complying written loan agreement, charging the correct interest rate, and making the required repayments, the entire loan amount can be treated as a taxable dividend.
This rule exists to stop company profits being quietly pulled out tax-free, dressed up as a loan that never really gets repaid.
The 2026 Benchmark Rate
For the year ending 30 June 2026, the ATO’s benchmark interest rate is 8.37%. That’s down slightly from 8.77% the year before, but it still has to be applied correctly.
Every complying Division 7A loan needs to charge at least this rate. The minimum yearly repayment is calculated using a formula based on the loan balance, this benchmark rate, and the remaining loan term.
Get the rate wrong, even by accident, and the repayment calculation is wrong too.
What Happens If You Miss the Deadline
This is where it gets expensive. If the minimum yearly repayment isn’t made by 30 June, the shortfall becomes a deemed dividend for that year.
A deemed dividend is treated as taxable income, usually without any franking credits attached. That means it can land at a higher personal tax rate than expected, on money you may not have actually received as cash.
Miss the repayment in multiple years, and the exposure compounds. Each missed year adds its own deemed dividend on top of the last.
The Trust Trap: Unpaid Present Entitlements
Many businesses don’t have a simple loan. Instead, a family trust distributes income to a private company as a beneficiary, but never actually pays the company the cash.
That unpaid amount is called an Unpaid Present Entitlement, or UPE. Left unmanaged, the ATO can treat that UPE as a loan under Division 7A, triggering exactly the same deemed dividend risk as a direct loan.
This is the trap that catches business owners who control both the trust and the company. It’s easy to assume money sitting “in the family structure” is safe. Division 7A doesn’t see it that way.
What to Check Before 30 June
Confirm whether you have any Division 7A loans or UPEs currently outstanding. This includes informal arrangements that were never written up as a formal loan.
Check the minimum yearly repayment has actually been calculated and paid. Don’t assume last year’s figure still applies the benchmark rate has changed.
Make sure repayments are genuine cash movements, not a new loan disguised as a repayment. The ATO specifically targets repayments that are immediately followed by a new loan for the same amount.
Review any UPEs sitting in your trust and company structure. If a sub-trust arrangement hasn’t been put in place, that entitlement may already be exposed under Division 7A.
Get this checked before the deadline, not after. Once 30 June passes, the deemed dividend has already been triggered. There’s no fixing it retrospectively.
Frequently Asked Questions
What is the Division 7A benchmark rate for 2025–26? 8.37%, down from 8.77% the previous year.
What counts as an “associate” under Division 7A? Spouses, children, relatives, business partners, and trusts or companies controlled by the shareholder or their family group.
Can I pay more than the minimum repayment? Yes. Extra payments reduce the loan principal, which lowers future minimum repayments and total interest.
What if my trust owes money to my company but it’s never been formally documented? That’s exactly the kind of arrangement Division 7A is designed to catch. It should be reviewed urgently before 30 June.
Keep Your Structure Compliant Talk to Edulink
Loan repayments, UPEs, and benchmark rates are easy to overlook when you’re focused on running the business day to day. That’s exactly where good bookkeeping earns its keep.
Edulink Payroll Services charges $750 per employee, per year, covering payroll, compliance, and reporting, for small and medium businesses across greater Sydney and Campbelltown.
Have more employees? Call us for a discounted rate.
📞 Call us today: 04 044 71 816
Edulink Payroll Services | Campbelltown & Greater Sydney | Call 04 044 71 816
Leave a Reply