# Division 7A – Minimum Yearly Repayment: Year 1

## Working

**Formula:**

$$\text{MYR} = \frac{P \times r}{1 - (1+r)^{-n}}$$

**Given values:**
- P = $50,000
- r = 0.0877 (8.77%)
- n = 7 years

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**Step 1 – Compute $(1.0877)^7$**

| Power | Value |
|-------|-------|
| $(1.0877)^1$ | 1.0877000000 |
| $(1.0877)^2$ | 1.1830913 |
| $(1.0877)^3$ | 1.2868484 |
| $(1.0877)^4$ | 1.3997050 |
| $(1.0877)^5$ | 1.5224591 |
| $(1.0877)^6$ | 1.6559788 |
| $(1.0877)^7$ | **1.8012081** |

**Step 2 – Compute the discount factor**

$$(1.0877)^{-7} = \frac{1}{1.8012081} = 0.5551829$$

$$1 - (1.0877)^{-7} = 1 - 0.5551829 = 0.4448171$$

**Step 3 – Compute MYR**

$$\text{MYR} = \frac{50{,}000 \times 0.0877}{0.4448171} = \frac{4{,}385}{0.4448171} = \mathbf{\$9{,}857.98}$$

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## Result

> **Minimum Yearly Repayment (Year 1) = $9,857.98**

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## Controlling Authority

The minimum yearly repayment rule for Division 7A complying loans is governed by **section 109E of the *Income Tax Assessment Act 1936* (Cth)**. Section 109E(5) prescribes the annuity-style formula used above, with the benchmark interest rate set annually by the Commissioner of Taxation via a Tax Determination (for FY 2025–26, the rate of 8.77% is published in the relevant annual Tax Determination, consistent with the Reserve Bank of Australia indicator lending rate).