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 Paying tax on profits withdrawn from your company might seem less attractive upfront, but done correctly, it’s part of a sustainable and smart financial strategy.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.
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SMART Business Solutions is proud to announce its recognition as the winner of Excellence in Local Community Connection (Medium–Large Business) and Excellence in Access and Inclusion at the 2025 Mornington Peninsula Business Excellence Awards.
