# Division 7A Minimum Yearly Repayment — Year 1

## Formula and Inputs

MYR = P × r / (1 − (1 + r)^−n)

Where:
- P = $50,000 (opening loan balance)
- r = 8.77% = 0.0877 (benchmark interest rate)
- n = 7 (remaining loan term, years)

## Working

**Step 1 — Compute (1 + r)^n:**

(1.0877)^7 ≈ 1.8012082

**Step 2 — Compute (1 + r)^−n:**

(1.0877)^−7 ≈ 1 / 1.8012082 ≈ 0.5551829

**Step 3 — Compute denominator:**

1 − 0.5551829 = 0.4448171

**Step 4 — Compute numerator:**

P × r = 50,000 × 0.0877 = 4,385

**Step 5 — Compute MYR:**

MYR = 4,385 / 0.4448171 ≈ 9,857.9856

## Result

**Minimum yearly repayment (Year 1) ≈ $9,857.99**

## Controlling Authority

The minimum yearly repayment requirement, including the amortisation formula based on the benchmark interest rate and remaining loan term, is set out in **section 109E of the Income Tax Assessment Act 1936 (Cth)** (in particular subsections 109E(3)–(6)), which governs when a Division 7A loan is taken to comply and prescribes the minimum yearly repayment calculation needed to avoid a deemed unfranked dividend. The benchmark interest rate itself is determined under section 109N (and the Commissioner's annual benchmark rate determination) in conjunction with this provision.