Hi @GlenPL,
No, Director 1 doesn’t need to receive an equal dividend where Director 2 has a deemed dividend under Division 7A from a loan. A Division 7A deemed dividend operates separately from ordinary dividend distributions and doesn’t trigger equal distribution requirements for other shareholders.
Division 7A can treat certain unpaid loans to shareholders as dividends where they aren’t repaid before the company’s lodgment day or don’t meet the complying loan requirements. If Director 2’s $30,000 loan is put on a complying loan agreement before lodgment day, it won’t be treated as a deemed dividend in that first year, provided the required minimum yearly repayments are made.
Any Division 7A deemed dividend applies only to the shareholder who received the loan and doesn’t require a matching dividend or accrual for Director 1. Each shareholder loan account is assessed separately.
Division 7A deemed dividends are generally unfranked. To be complying, the loan agreement must be in writing, in place before lodgment day, and meet the minimum interest charge and maximum term requirements. Reviewing the Division 7A guidance on our website will help confirm your arrangement is complying.
12 views
0 replies