---
title: What practice owners should know before borrowing company money
description: Using practice company funds for private spending? Review Division 7A, repayment funding and household cash flow before drawing the money.
image: https://www.verityadvisory.com.au/hubfs/Doctor%20typing%20on%20his%20computer%20in%20the%20office.jpeg
---

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# What practice owners should know before borrowing company money

![](https://www.verityadvisory.com.au/hs-fs/hubfs/72ppi-TommyLi-0016475-top.jpg?width=48&height=48&name=72ppi-TommyLi-0016475-top.jpg)  Tommy Li CA · Published 22 October 2026

![](https://www.verityadvisory.com.au/hs-fs/hubfs/Doctor%20typing%20on%20his%20computer%20in%20the%20office.jpeg?width=880&height=587&name=Doctor%20typing%20on%20his%20computer%20in%20the%20office.jpeg)

In this article

Money in a practice company’s bank account is not automatically available for its owners’ private spending. Before using it for school fees, a home deposit or a family purchase, decide how the withdrawal will be treated and funded over time.

## First, establish whose income it is

A GP contractor’s clinical income and profits generated by a broader practice business are not necessarily taxed in the same way. Income mainly rewarding an individual’s skills or effort can be personal services income. A company structure alone does not settle whether income can be retained or distributed as intended.

The starting point is to review the income and structure, rather than assume every doctor has company profits available to lend.

## What a complying loan requires

Division 7A can treat certain private company payments, loans or forgiven debts involving shareholders or associates as unfranked dividends, subject to exceptions and other limits. For a loan that needs complying terms, address it before the company’s lodgment day.

A complying arrangement requires a written agreement, the applicable benchmark interest and a permitted term. The usual maximum is seven years. A 25-year term requires qualifying registered real-property security and the statutory security-value test; simply describing a loan as secured is insufficient. Minimum yearly repayments generally begin in the income year after the loan is made.

## How will you fund the repayments?

Documentation is only part of the decision. Map the proposed repayments against expected household income and practice cash needs.

For example, a practice owner considering a home deposit should compare the proposed company loan with the mortgage repayments, family spending and reserves required after settlement. If dividends will fund the company-loan repayments, include the associated personal tax and check the company can support the distributions.

Repeated drawings deserve particular attention. Several loans created in different years can produce overlapping commitments that are easy to miss when looking only at the latest withdrawal.

## When a company loan may make sense

Our view is that a properly structured loan can have a legitimate role, but its value depends on purpose, alternatives, repayment capacity and the combined company and personal tax outcome. Deferring a distribution is not the same as eliminating the cost of accessing company funds.

- Reconcile existing shareholder and related-party balances.
- Identify proposed private withdrawals before making them.
- Model the combined repayment schedule and household commitments.
- Compare appropriate salary, dividend and borrowing alternatives.
- Set a review date well before relevant deadlines.

If you expect to use company funds for personal purposes, contact Verity before transferring them. We can first establish the tax position and then assess the cash-flow consequences of the available options.

![Tommy Li](https://www.verityadvisory.com.au/hs-fs/hubfs/72ppi-TommyLi-0016475-top.jpg?width=76&height=76&name=72ppi-TommyLi-0016475-top.jpg)

Tommy Li CA

Founder and Principal Adviser, Verity Advisory · Registered Tax Agent · Authorised Representative No. 1261831 · Member, Chartered Accountants ANZ

Tommy is a Chartered Accountant with 20+ years’ experience in accounting. He founded Verity Advisory to give doctors integrated advice at the financial decisions that matter most, bringing tax, borrowing and financial planning into one structured approach.

[Connect with Tommy on LinkedIn →](https://www.linkedin.com/in/tommylica/)

**General advice warning.** This article is general information and general advice only. It isn’t personal advice and doesn’t take into account your objectives, financial situation or needs, so consider whether it’s appropriate for you before acting. Where a financial product is discussed, obtain and read the relevant Product Disclosure Statement before making a decision.

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