ATO Interpretative Decision
ATO ID 2003/347
Fringe Benefits Tax
Loan Fringe Benefits - advance of money by chequeThis ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the date on which an employee receives a cheque for an advance of money from an employer, the time at which a loan benefit arises under subsection 16(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Decision
Yes. The date on which an employee receives a cheque for an advance of money from an employer is the time at which a loan benefit arises under subsection 16(1) of the FBTAA.
Facts
An employer offered to make a loan of money to an employee. Under the terms and conditions of the agreement, the loan was interest-free and immediately repayable by the employee on the cessation of their employment. The offer was accepted by the employee and the advance was paid by cheque.
The employee held the cheque for a number of months before presenting it for payment at a bank. The borrowed funds were used by the employee to meet private expenses.
Reasons for Decision
Under subsection 16(1) of the FBTAA, when an employer makes a loan of money to an employee, a loan benefit arises in respect of each year in which an employee is under an obligation to repay the whole or any part of the advance. In effect, this means that a loan benefit arises at the time when a loan is made.
A cheque represents a written instrument that embodies a right to be paid and is generally regarded as payment of cash unless and until it has been presented and refused. In Tilley v. The Official Receiver (1960) 103 CLR 529 at 535 Kitto J, in a general observation concerning payment by cheque, stated that
There can be no doubt that the acceptance of a payment by cheque implies, if there be nothing to the contrary, an agreement that it shall be considered as payment, subject to the condition subsequent that if the cheque be dishonoured it shall no longer be so considered.
By accepting the cheque which is regarded as payment of the advance, the employee was at liberty to bank it or apply it as he or she wished. The employee chose not to bank the cheque immediately and when it was eventually presented for payment, it was honoured.
It is considered that the right to draw the money is a loan and thus the loan benefit arose at the time the right was created or granted, which is when the cheque was handed to the employee. It is irrelevant that the employee did not present the cheque for payment for several months.
Date of decision: 22 January 2003Year of income: Year ended 31 March 2003
Legislative References:
Fringe Benefits Tax Assessment Act 1986
subsection 16(1)
Case References:
Tilley v. Official Receiver in Bankruptcy
(1960) 103 CLR 529
Keywords
Cheques
FBT loan
Fringe benefits tax
Loan fringe benefits
Date reviewed: 23 March 2026
ISSN: 1445-2782
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