Fringe benefits tax: What is the benchmark interest rate to be used for the fringe benefits tax year commencing on 1 April 2005?
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FOI status:may be released
|The number, subject heading, date of effect and paragraphs 1 and 2 of this document are a 'public ruling' for the purposes of Part IVAAA of the Taxation Administration Act 1953 and are legally binding on the Commissioner.|
1. The benchmark interest rate for the fringe benefits tax (FBT) year commencing 1 April 2005 is 7.05 per cent per annum. There has been no change to the rate of 7.05 per cent that has applied for the previous FBT year.
- a fringe benefit provided by way of a loan; and
- a car fringe benefit where an employer chooses to value the benefit using the operating cost method.
3. On 1 April 2005 an employer lends an employee $50,000 for five years at an interest rate of 5% per annum. Interest is charged and paid 6 monthly and no principal is repaid until the end of the loan. The actual interest payable by the employee for the current year is $2,500 (50,000 ? 5%). The notional interest, with a 7.05 per cent benchmark rate, is $3,525. The taxable value is $1,025 ($3,525 - $2,500).
4. Note: FBT does not apply to a loan in relation to a shareholder in a private company, or an associate of such a shareholder, that causes (or will cause) the private company to be taken under Division 7A of Part III of the Income Tax Assessment Act 1936 to pay the shareholder or associate a dividend.
Date of effect
Commissioner of Taxation
30 March 2005
Not previously issued as a draft