Div 7A Loan Reconciliation: What to Ask Clients For (And When)
A practical Div 7A document request checklist for Australian accountants — exactly which loan documents to ask for, how to phrase the request, and when to send it.
Table of contents
- 1. When to start the Div 7A chase
- 2. The full document checklist
- 3. The request that gets a complete response
- 4. The four common failure modes (and how to head them off)
- 5. What the file should contain at lodgement
- 6. The fee conversation that should follow
- 7. The Div 7A timeline that actually works
- 8. Talking to clients about Div 7A without scaring them
- 9. Why this work shouldn't be bundled into a tax return fee
- 10. Practice-level tooling that helps
Div 7A is the part of EOFY that quietly eats the most time per dollar of fee. The legislation hasn't changed much in a decade, but the document chase is harder than ever because clients have more accounts, more loan types, and shorter attention spans. This is the exact checklist we use to get Div 7A documents in one round-trip.
Quick recap: Division 7A applies when a private company makes payments, loans or forgives debts to shareholders or their associates. Get the documentation wrong and the ATO can treat the loan as an unfranked dividend — a tax outcome no client enjoys explaining at the kitchen table.
When to start the Div 7A chase
Mid-April for a 30 June year-end. Earlier than the rest of your EOFY chase because Div 7A documents often require client signatures, board minutes, or amendments to existing loan agreements — none of which happen in a hurry.
The full document checklist
- Prior-year Div 7A loan agreements for every loan still on foot
- Loan ledger showing opening balance, drawdowns, repayments, and interest charged during the year
- Evidence of minimum yearly repayments (bank statements showing the transfer, not just a journal)
- Board minutes or written resolutions for any new loans during the year
- Distributable surplus working — current year P&L plus retained earnings
- Detail of any payments made by the company on behalf of shareholders or associates (school fees, personal credit cards, travel)
- Records of any debt forgiveness, formal or informal
- Confirmation of which benchmark interest rate applies — the ATO publishes one each year
The request that gets a complete response
"Hi [Name], for your [Year] Div 7A position I need the items below by [date]. Anything missing creates a real risk of the loan being treated as a dividend, so please send everything — even the bits you're not sure about. Upload in one go: [link]."
Two phrases do most of the work. 'Real risk of the loan being treated as a dividend' is specific enough that clients take it seriously without sounding alarmist. 'Even the bits you're not sure about' removes the perfectionism that delays uploads.
The four common failure modes (and how to head them off)
1. The 'verbal repayment'
Client tells you they repaid the loan but you can't see it on any statement. Ask for the bank reference and date. If it's not there, it didn't happen — and the minimum repayment hasn't been met.
2. The 'I'll just transfer it before 30 June' plan
Tell clients in April, not June. A last-minute transfer from one of their own accounts to the company looks like a circular transaction and can be unwound by the ATO. Real repayments need real cash flow.
3. The new loan with no agreement
If a client took money out during the year and there's no signed Div 7A loan agreement before lodgement day, you have a problem. Send the template the same week you spot the drawdown — don't wait for EOFY.
4. The forgotten payment on behalf of shareholders
School fees, holiday house bills, personal credit cards paid from the company account. Clients rarely volunteer these. Ask explicitly: 'Did the company pay anything personal for you or your family this year?' The question gets answers the document request doesn't.
What the file should contain at lodgement
- Up-to-date loan agreement for every loan on foot
- Reconciled loan ledger matching the company financials
- Evidence of minimum yearly repayments actually paid in cash
- Distributable surplus calculation
- Board minutes for any new loans
- A short file note summarising the year's Div 7A activity in plain English
That last file note is the difference between a five-minute ATO query response and a five-hour one. Future-you will be grateful.
The fee conversation that should follow
Div 7A work is technical, time-sensitive, and high-risk. It should not be bundled into a flat-fee tax return. Quote it separately, explain why, and most clients agree without negotiation. The ones who don't are telling you they don't value the risk you're managing — useful information either way.
The Div 7A timeline that actually works
- Mid-April: send the document request with the full checklist.
- Late April: review what's arrived, flag missing loan agreements early.
- Mid-May: confirm minimum yearly repayments are scheduled or paid.
- Mid-June: prepare distributable surplus calculation.
- Pre-30 June: lock loan agreements for any new drawdowns.
- Post-30 June: file note and reconciled ledger ready for lodgement.
Talking to clients about Div 7A without scaring them
Most clients hear 'Division 7A' and assume they've done something wrong. Lead with the framing that Div 7A is a normal compliance step for any company with shareholder loans — not a red flag. Then walk them through what you need and why. Curious clients send documents faster than anxious ones.
Why this work shouldn't be bundled into a tax return fee
Div 7A reviews carry real risk and real time. A flat tax return fee almost never covers the work, and bundling them trains clients to expect Div 7A scrutiny as 'free'. Quote separately, scope explicitly, and your margin on companies with shareholder loans stops being negative.
Practice-level tooling that helps
Keep a single Div 7A working file per company, updated each year — not rebuilt from scratch. A consistent template means the next accountant who picks up the file (including future-you) understands the loan history in 10 minutes instead of two hours.
Frequently asked questions
When does Division 7A actually apply?+
When a private company makes a loan, payment, or forgives a debt to a shareholder or their associate. The ATO's broad definition catches many transactions that don't feel like 'loans' on the surface — including paying personal expenses from the company account.
What's the benchmark interest rate for the year?+
The ATO publishes the Division 7A benchmark interest rate each year. Check the ATO website for the current year — it changes annually and applying the wrong rate is a common reconciliation error.
What happens if the minimum yearly repayment isn't made?+
The shortfall is treated as an unfranked dividend to the shareholder — taxed at their marginal rate with no franking credit. It's one of the most expensive accidental tax outcomes in the system.
Can a Div 7A loan agreement be backdated?+
No. The agreement must be in place by the company's lodgement day for the year the loan arose. Backdating is a documented red flag in ATO reviews and can void the agreement entirely.
How long should I keep Div 7A records?+
At least seven years from the date the loan is fully repaid. The ATO can review historical positions long after the original tax year, especially when loan balances persist.
Stop chasing. Start lodging.
DocChase sends the reminders, follows up on the right schedule, and lands every document in one place — so you can spend EOFY doing the work, not asking for it.
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