Section 109M of Income Tax Assessment Act 1936 (ITAA 1936), states that a private company is not taken to pay a dividend because of loan, when it is made under the following circumstances:

1.    In the ordinary course of the private company's business; and

2.    On the usual terms on which the private company makes similar loans to parties at arm's length.  

Section 109N of ITAA 1936, explains the criteria for such a loan:

1.    The loan agreement is in writing;

2.    The rate of interest payable on the loan equals or exceeds the benchmark rate for that year; and

3.    The term of the loan does not exceed a certain term.