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In this episode, Mai and Lee unpack one of the most misunderstood areas of running a company: director’s loans. While many business owners see this account in their financials, very few truly understand how it works, or how costly it can become if handled incorrectly.

Mai breaks down what a director’s loan actually is, why it exists, and how it’s often used to record personal spending through the business. More importantly, she explains how Division 7A rules come into play, and why they’re designed to stop business owners from accessing company funds without paying the right amount of tax.

In this episode, Mai talks about:

• The purpose of a director’s loan and why it appears in your accounts
•  How Division 7A applies to money taken from your company
•  What happens when a director’s loan becomes a deemed dividend
•  How unpaid balances can significantly increase your personal tax liability
•  Why treating your business like a personal ATM creates problems
•  When and how you can use a director’s loan to manage short-term cash flow
•  What a Division 7A loan agreement is and when it should be put in place
•  How to structure your income (wages vs drawings) to manage tax effectively
•  Why timing plays a key role in when and how you pay tax

This episode is a reminder that understanding how you take money out of your business is just as important as how you make it. When used correctly, tools like director’s loans can provide flexibility and control, but without the right advice, they can quickly turn into one of the most expensive mistakes a business owner makes.

If you’d like a copy of Mai’s Director’s Loan Compliance Checklist, DM the word Loan on Instagram at @the_maiharris.

You can also submit questions or topic ideas via the Ask Mai link at the top of the show notes.

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Disclaimer

The advice contained in this presentation is general in nature only and should not be acted on without first seeking professional advice.

Your personal circumstances have not been taken into account, and you should consider the appropriateness of the advice to your individual needs.