The constitution contains a schedule making provision for seven year loans by the company to members, which we believe satisfies the requirements set out in Tax Determination 2004/86 (which has been withdrawn, notwithstanding that the Tax Office’s views in the area remain largely unchanged) and TD2008/8 for compliance with Division 7A Income Tax Assessment Act 1936 (Cth).
For completeness, the provisions in the schedule only apply to loans made by the company in its own capacity (i.e. not in its capacity as trustee of a trust) and the Tax Office’s view in TD2008/8 is that the shareholder and the company are still required to agree in writing that the provisions of schedule will apply to the shareholder loan (for instance, by exchange of correspondence).
We recommend that you obtain specialist advice if loans are to be made by the company other than to members, as the tax consequences of these arrangements can be complex. Similarly, if you are in any doubt as to the implications of the company making a loan to a member we recommend that advice is obtained, ideally before the loan is made.