8.5 Taxable value of loan fringe benefits
The taxable value of a loan fringe benefit is the difference between:
- the interest that would have accrued during the FBT year if the statutory interest rate had applied to the outstanding daily balance of the loan, and
- any interest that actually accrued.
GST does not affect the taxable value of loan fringe benefits, so these benefits are always grossed up at the type 2 rate. For more on GST and FBT, refer to What is fringe benefits tax?
On 1 April 2008, an employee was given a $50,000 loan at an annual interest rate of 5% (payable six-monthly). No repayments of principal were required during the next 12 months. The statutory interest rate is 9.00%.
The notional interest on such a loan would be $4,500 ($50,000 x 9.00%).
The actual interest for the 2008-09 FBT year would be $2,500 ($50,000 x 5%). The difference of $2,000 ($4,500 - $2,500) would be the taxable value of the loan fringe benefit.