Taxation Determination

TD 98/22A2 - Addendum

Income tax: under Division 7A of Part III of the Income Tax Assessment Act 1936 ('the Act'), how is the benchmark interest rate used for private company loans to shareholders or associates?

FOI status:

may be released

ADDENDUM

This Addendum amends Taxation Determination TD 98/22 as follows:

At paragraph 6, Example 2

Replace:

6. If the amount of a loan not repaid at 30 June 1998 is $100,000, the term of the loan is five years, the remaining term of the loan is also five years, the repayments made for the 1998-99 year of income were $26,000 and the current year benchmark interest rate is 6.7%, the minimum yearly repayment for the 1998-99 year of income is calculated as follows:

(Amount of the loan not repaid by the end of the previous year of income  * Current year's benchmark interest rate) / remaining term of loan 1 - [1 / (1 + current year's benchmark interest rate)]

(100,000 * 0.067) / [- [1 / (1 + 0.067] 5

= 24,193

With the following:

6. If the amount of a loan not repaid at 30 June 1998 is $100,000, the term of the loan is five years, the remaining term of the loan is also five years, the repayments made for the 1998-99 year of income were $26,000 and the current year benchmark interest rate is 6.7%, the minimum yearly repayment for the 1998-99 year of income is calculated as follows:

(Amount of the loan not repaid by the end of the previous year of income * Current year's benchmark interest rate) / (1 - (1 / ((1 + Current year's benchmark interest rate))^ Remaining term))

=(100000 * 0.067) / (1 - (1 / (1 + 0.067))^5)

= 24,193

Commissioner of Taxation
31 January 2001

References

ATO references:
NO NAT T2000/13746

ISSN 1039 - 0731

Related Rulings/Determinations:

TD 98/22A


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