It might seem like a clever strategy - moving surplus business cash into your personal mortgage offset account to save on home loan interest, then shifting it back to the company around tax time. But there’s a catch: the ATO sees this, and they’re not fans.
This approach, while common among company-operating business owners, can trigger serious tax implications under Division 7A of the Tax Act. And specifically, Section 109R exists to prevent exactly this kind of timing play.
If you (or an associate) owe money to your company, and you “repay” it before 30 June - only to borrow a similar or larger amount shortly after - then you haven’t really repaid the loan in the eyes of the ATO.
In fact, there are two key red flags that will likely lead to that repayment being disregarded:
If either applies, the repayment is disqualified and the funds can be treated as an unfranked dividend - which means you could be left with a larger tax bill than expected.
Tax strategies should build long-term confidence, not short-term loopholes. Paying tax on profits withdrawn from your company might seem less attractive upfront, but done correctly, it’s part of a sustainable and smart financial strategy.
At Smart Business Solutions, we take a proactive and holistic approach to both your business and personal financial worlds. Our goal is to simplify the complex and empower you to make informed, confident decisions, without unintended consequences.
Strategies that supports your cashflow, protects your compliance, and builds for the future. Book a free Discovery Call to start the conversation.
The ATO will stop accepting direct credit card payments from 1 December 2026, requiring businesses and individuals to switch to alternative payment methods such as debit card, BPAY, EFT or bank account direct debit. While the change affects only a small percentage of taxpayers, businesses that rely on credit cards to manage cash flow or fund ATO payment plans should act now to update arrangements, avoid missed payments and prepare for the cash flow impact of having tax obligations funded from available business funds.
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