Loan Agreement Template Australia: Private and Business Loans in Writing

A loan agreement in Australia is a signed document that records who is lending, who is borrowing, how much, whether interest is charged, how and when it is repaid, and what happens if a payment is missed. A clear written agreement signed by both sides is the simplest way to show what was agreed if there is a question later. It matters most when the parties are not family: a loan to an acquaintance, to someone else’s business, or between companies.

Claim Done drafts a loan agreement from your answers for a flat A$49. You download the PDF straight away and both parties sign it.

Who this kind of agreement is for

A one-off loan between two parties who have agreed terms. For example:

• one person lending to another person they know, but who is not family
• a person lending to a friend’s or associate’s business
• an owner lending to their own company, or a company lending to another company

It is not for someone who lends money as a business to customers or the public. The next section explains when credit law may apply.

When credit law and licensing may apply to the lender

The Australian Securities and Investments Commission (ASIC) says that if you plan to provide credit for consumer loans, you may need a credit licence, and that you will generally need a credit licence to engage in credit activities, which include providing credit under a credit contract. ASIC also says not to start credit activities until you hold a licence or are exempt. The exemptions are listed in ASIC’s Regulatory Guide 203.

ASIC’s Information Sheet 101 makes two points:

• The test for consumer credit is whether the advance is predominantly for personal, domestic or household purposes. “Predominantly” means more than a 50% consumer component.
• Loans to companies are not subject to the credit legislation. Only loans to natural persons and strata corporations are caught.

ASIC says its information sheet is a summary and not a substitute for professional advice. If you lend regularly, or lend to individuals for personal use, check ASIC’s guidance in full and get your own advice. Moneysmart describes a credit contract as a document with the loan’s term, interest rate, fees and charges, and repayments. The Claim Done agreement is not drafted as a consumer credit contract and adds no consumer credit disclosures.

What a loan agreement should record

1. The parties: full names, and a company’s full legal name.
2. The amount lent, in figures, and the purpose if you want to state one.
3. Interest: interest-free, or the agreed rate and how it is worked out.
4. Repayments: a lump sum by a date, or instalments with the amount, frequency, start date and end date.
5. Early repayment and what it does to interest.
6. Security or a guarantee, or a statement that the loan is unsecured.
7. Default: what happens if a payment is missed, such as time to catch up after a written reminder.
8. Governing law and dated signatures of everyone who signs.

The structure of the agreement

The agreement Claim Done drafts uses numbered clauses under these headings:

• Date and parties
• The loan: amount, and purpose if given.
• Interest: interest-free, or your agreed rate in your words. It never sets a rate for you.
• Repayment: your lump sum date or instalment plan.
• Early repayment: allowed without penalty, with interest only to the repayment date.
• Security or guarantee: as you describe it, or unsecured.
• If a payment is missed: your term, or a short, fair one with no added fees.
• General: whole agreement, changes in writing, governing law, counterparts.
• Signing block for the lender, the borrower and any guarantor.

Interest and tax

Charging interest is a choice the parties make. If you do charge it, the Australian Taxation Office (ATO) says an Australian resident who receives interest must declare it as income, and that this includes interest earned from any other source. Interest is declared in the year it is credited, received or applied.

A private company lending to its shareholder

Company loans have a special tax rule. Under Division 7A, the ATO says a private company may be taken to have paid a dividend if it lends to a shareholder or an associate of a shareholder. The ATO says a loan is not treated as a dividend if it is made to another company that is not acting as a trustee.

For a complying shareholder loan, the ATO says the interest rate each year must at least equal the Division 7A benchmark rate, which is updated each year, and the term must not exceed 7 years (25 years for a loan secured by a mortgage over real property that meets set conditions). A written agreement must be in place before the company’s lodgment day. As a minimum, the ATO says it should identify the parties, the amount and term, the requirement to repay and the interest rate, and be signed and dated. The ATO notes it is reviewing that page after a recent court decision. If Division 7A could apply, ask your tax adviser for the rate and term first. The agreement records the rate and plan you give it.

Taking security, and the PPSR

The Personal Property Securities Register (PPSR) is the official government register of security interests in personal property. Its Registrar’s office sits in the Australian Financial Security Authority (AFSA). Personal property includes things like cars, company assets and boats, but not land or fixtures. People can search the PPSR before lending money to someone. An online search costs $2 (as at November 2026).

The PPSR says a security interest is created by an agreement where a person can take property if a debt is not repaid. Registering is optional, but a written agreement alone may not be enough. Without a registration, someone who has registered could be ahead of you if the borrower goes insolvent, because you would likely be an unsecured creditor. Individuals can register, and the PPSR says to register as soon as possible. Registering without a valid agreement that creates a security interest can breach the law.

To register you need a PPSR account and a secured party group. Fees depend on how long the registration lasts. In most cases you must tell the grantor (the person who gave you the security) that you have registered, for example by sending them the verification statement.

Be clear about the limits here. The Claim Done agreement records security or a guarantee in your words. It does not create a mortgage, a charge, a separate security agreement or a PPSR registration. If you need one of those, get advice and treat it as a separate step.

Moneysmart says a guarantor agrees to repay the loan if the borrower cannot, and may have to repay all of it. It suggests a guarantor consider independent legal or financial advice before signing.

Signing, paying and keeping records

• Both parties read and sign the agreement before the money moves. Each keeps a signed copy.
• Pay the loan by bank transfer, not cash, so there is a record of the advance.
• If the terms change, put the change in writing and have both parties sign it.

The ATO says you need records showing any income you declare, such as interest, and that you generally keep written evidence for 5 years from the date you lodge your tax return. Paper or electronic copies, including photos, are accepted.

If a payment is missed

Start with the default clause you signed. Send a short written reminder with the amount due, the due date and the time the agreement allows to catch up, and keep a copy. If the borrower is struggling, you can agree a new plan in writing. If the loan is still not repaid, you can send a formal letter of demand setting out the balance owing and a date to pay.

Mistakes to avoid

• Handing over money before anything is signed.
• Leaving the interest vague. Write “interest-free” or the exact rate and how it is worked out.
• Assuming a sentence about security protects you without a PPSR registration.
• Lending to individuals for personal use as a regular business without checking ASIC’s licensing rules.
• A company lending to a shareholder without checking Division 7A first.

If you are about to lend or borrow, put the terms down first. Claim Done drafts your loan agreement from your answers for A$49, ready to download and sign today.