Have You Reviewed Your Division 7A Loans? - AFP Accounting

Have You Reviewed Your Division 7A Loans?

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On 1 July 2023, the ATO increased the interest rate on Division 7A loans from 4.77% to 8.27%.

If incorrect interest and fundamental repayments are made by the lodgement date, the loan amount will be declared unfranked dividends.

Therefore, the shareholder who receives the money is liable to pay tax at their marginal tax rate, payable on top of the fixed rate the company already paid.

Making the overall tax rate on the loan received as much as 70%.

How Do Division 7A Loans Work?

Division 7A is the law that governs payments from a private company to shareholders.

It prevents private companies from distributing profits to shareholders tax-free.

A Division 7A loan agreement allows shareholders to draw money from their company taxed at a lower rate.

However, the whole point of a loan is to be paid back – with interest.

The Australian Tax Office (ATO) has a calculator that provides some guidance as to whether the loan is compliant with Division 7A, including the following:

  • the minimum interest rate you may charge;
  • the minimum required repayments of interest and principal, and
  • the term (i.e. length) of the loan.

The easiest way to prevent triggering an audit from the ATO is to have a complying loan agreement and stick to it.

If the shareholder regularly pays the minimum amount of interest and repays the principal within a set timeframe, they can safely access the money without consequence.

A common way of making each year’s minimum repayment on a Division 7A loan is to balance it with a dividend of the same amount. So you would owe the business X for the loan, but they owe you X for the financial year’s dividends. They are essentially cancelling each other out.

The period you have to repay the loan depends on the type of loan acquired from the private company. There are two types of complying Division 7A loans:

  • Unsecured loans. These have a maximum term of seven years.
  • Secured loans. These can take up to 25 years, depending on the security used.

If you make an error in your loan agreement, this might mean that your loan agreement is no longer compliant, and the money will be assessable for tax purposes.

Contact your accountant to reevaluate your company loan agreements or book a discussion with us today.

If you’re not actively managing your loan, chances are you’re paying more than you need to — and missing out on savings of $50 a week or more.

Whether it’s a mortgage, personal loan, or asset finance, small tweaks can unlock big savings. At AFP Finance & Loans, we’ve helped clients reduce repayments by over $2,600 a year — without changing their lifestyle or taking on more risk.

This article breaks down practical, proven ways to help you save around $50 each week on your repayments — and why working with a broker enables you to reach your goal of paying off your loan more easily.

1. Lower Your Rate

One of the simplest ways to save $50 a week is by securing a better interest rate. According to findings by PEXA, homeowners who refinanced to a new lender saved an average of $1,908 per year (nearly $37 per week) compared to just $384 annually for those who stayed with their original lender.

The kicker? Existing customers often pay 0.21% more than new customers. That small difference could mean an extra $70 each month on a $526k mortgage.

Refinancing through a trusted broker at AFP Finance & Loans ensures you’re not just accepting the status quo. We compare lenders, negotiate better terms, and help you avoid hidden costs.  

Tip: If your rate drops, keep repayments the same to pay off your loan faster and save more in interest.

2. Switch to Weekly or Fortnightly Payments

Most people don’t realise they can make an extra month’s repayment each year just by switching from monthly to fortnightly payments.

If your lender calculates interest daily, this simple change can cut years off your loan and save thousands in interest.

While more frequent payments may not free up the whole $50 immediately, the compound savings are significant over time.

3. Use an Offset Account

Do you have savings sitting in a separate account? You could be missing an opportunity to save $50 each week in interest.   

An offset account is a type of bank account linked to your loan. The balance in this account is used to offset the principal (the amount you still owe) — meaning the interest you pay is calculated on a reduced balance.

An offset account allows your money to shrink your loan amount, without locking your savings away. Funds remain fully accessible — but while they sit in the account, they’re actively working to lower the interest you pay (without any extra repayments).

For example, keeping $50,000 in offset on a 6% loan saves about $3,000 a year — or $57 a week — making every dollar work harder for you.

4. Cut Hidden and Ongoing Fees

Fees can quietly erode your savings. Annual package fees can range from $300 to $400, and monthly service fees still exist on many products.

By switching to a low-fee alternative or refinancing smartly, you could reduce your outgoings by $10–$15 a week. We review fee structures and recommend lenders who offer genuine value — not just teaser rates.

Why Work with a Broker?

From refinancing and rate shopping to offset structuring and fee analysis, you will be supported from start to settlement with AFP Finance and Loans. We’ll act on your behalf, comparing options and securing better terms.

With access to over 50 lenders on our accredited panel, AFP Finance & Loans assists clients with residential loans, commercial loans, personal loans, investment finance,  and more. We do the heavy lifting so you can focus on what matters to you.

How to Start Saving $50 a Week, Today

You came here to save $50 a week on your loan, and by now you should see it’s easier than it sounds.

Many people overpay without realising. However, with better advice and a few simple adjustments, you can lower costs, improve cash flow, and stay on track financially.

The next step? Get expert eyes on your current agreement. AFP Finance & Loans can help you reduce repayments, avoid fees, and structure your loan repayments to serve your goals.

Book your loan review today to put $50 a week back where it belongs: in your pocket.

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