A Div 7A loan will be declared to exist where a private company does one of two things: they can either expressly give rise to such a loan; or they can intentionally fail to call for payment of an Unpaid Present Entitlement (UPE) from the trust. Generally, however, a UPE is not a loan. It only becomes so when the UPE is the provision of financial accommodation.
A private company with a UPE will be held to have made a financial accommodation to a trust if (a) the company has provided some form of pecuniary aid or favour to the trust and (b) a sum is ultimately (re)payable to the company from the trust. With these two elements, by a company intentionally failing to call for payment of the UPE, they are providing pecuniary aid or favour to the trust and since the trust will ultimately have to pay the UPE to the company, the sum is ultimately payable from the trust to the company. If these two elements can be met, a company will have formed a Div 7A loan with the trust. In this situation, a debtor/creditor relationship replaces the UPE.