With TaxPlan Advanced tools, you can calculate the interest saved through accelerated dividend payments (or other cash reserves) to reduce a Div7A loan and then send your client a professional advice report.
Prepare interest saved calculations
Download the Div7A Workpaper to model how the Div7A interest rate increase will impact your client.
The Div7A Loan Elimination Worksheet and Advice Report help clients understand their options for accelerated loan repayment. It is not a comprehensive Div7A Loan Calculator.
Most accountants declare a dividend on either 1 July or 30 June to use the funds to repay a Div7A Loan, which is now available in the new version of the Worksheet.
Note: For clients with Trusts that pay company tax instalments during the year and classify these as repayments of the Div7A Loan, we recommend using the ATO Div7A Calculator.
Inform and educate
Initiate conversations with your clients using the Value Plan Price client email template to offer this advice report.
Prepare the Client Advice Report in TaxPlan
Create a new TaxPlan and add the company and individual client.
Create a Base Scenario
Add the Income and Div7A Interest Received amounts for the company.
Add the usual income for the individual with no additional Dividend distributions.
Copy the Base to create a new Minimum Annual Div7A Repayment Scenario
Add the Distributions for the minimum payment amount to the individual as a repayment.
Example description: "This scenario includes your annual minimum repayments for a Division 7A Loan with a starting balance of $XX,XXX from the Bucket Company to [add name]."
Create a new scenario for Larger / Accelerated Div7A Loan Repayment
Add the lower interest payable amount.
Add the larger Distribution amount to the individual.
Select this as your recommended scenario.
Example description: "This scenario includes a larger Dividend of $XX,XXX to [add name], allowing for accelerated payments to reduce the Division 7A Loan faster, and therefore reduce non tax-deductible interest charged."
Download the advice report from the Reports modal (available to TaxPlan Advanced subscribers).
The Scenario summaries will be automatically included.
Further personalise the advice report as indicated in red text.
Select which Strategies to Consider to Eliminate your Division 7 Loans to include for your client.
Calculate the tax savings from making accelerated loan payments and complete the Benefits from Accelerated Div7A Repayment table provision in the report.
Tax Savings for the first year are calculated as the difference between the Base Scenario and the Recommended Scenario.
Save the advice report to your Document Management System and send it to your client.
Follow up with client
Prepare a Dividend Statement.
Plan for larger annual minimum repayments.
Pay off the loan from other funds.