Commonly charged at $150.00 – we supply it absolutely free.
Unlike the present provisions in the constitution concerning shareholder loans, the Division 7A Loan Agreement may be entered into with associates of shareholders who would not otherwise be bound by the constitution.
Our solicitors KB Legals Pty Ltd have prepared a Division 7A Loan Agreement in a proforma format and has made such document available to Company Creations for general distribution to its clients. Our solicitors KB Legals Pty Ltd recommends that shareholders, spouses and associates of shareholders complete this agreement as a safeguard against the provisions of Division 7A of the Income Tax Assessment Act 1936.
An important reference for your convenience:
You and Your Shares (ATO)
EXPLANATION OF DIVISION 7A LOAN AGREEMENTS AND CLAUSE 32 OF OUR PROPRIETARY COMPANY CONSTITUTION
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Payments or loans made to shareholders or associates of shareholders by private companies may be treated as dividends (ie. income) for taxation purposes under Division 7A of the Income Tax Assessment Act 1936 (Cth).
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Clause 32 of our Proprietary Company Constitution operates as a default or backup Division 7A Loan Agreement in circumstances where the company makes or provides a loan or payment to a shareholder or shareholders of the company. The terms of clause 32 conform with Division 7A of the Act, hence there is no need for the shareholder to enter into a separate Division 7A Loan Agreement.
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However, if the company makes a payment or loan to relatives or associates of shareholders of a company then such relatives or associates who are owners of the company will not be afforded the protection of clause 32 of our constitution as the constitution only applies as a contract between the company and shareholders. In such circumstances the proposed borrower who is a relative or associate of the shareholder should enter into a support loan contract which conforms with the terms of Division 7A of the Act. Attached is a proforma Division 7A Agreement which can be utilised.