Company Loans to Shareholders

What is the proposed change?

• Outstanding loans from a company to a shareholder would be treated as taxable income of the shareholder six months after the lending company is removed under the companies act 1993.

• Applies six months after a company is removed from the register, if at the time:

  • There is a financial arrangement between a person (party) and the company, and 

  • The person is a close relative of a shareholder or director of the company, or a shareholder or director if the company

• Remaining payments from the financial agreement are discharged six months after company is removed from register. 

• Base price adjustment will be calculated under existing rules, which is the taxable income for the person.

• The six-month period allows for reinstatement of inadvertently removed companies from the register.

• This rule will apply to companies removed from the register from 4 December 2025 and on. 

Why this change is needed?

• Overdrawn shareholder current accounts or debit loan amounts due to outstanding loans from removed companies.

• Current timing of income from outstanding loans are unclear.

• No tax was being paid on outstanding loans from the result of difficulties through monitoring shareholder obligations. 

Who would be affected?

• Shareholders who receive a loan from their company and those who don’t repay the loans.

• Directors or close relative to shareholders or directors.