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?

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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:

(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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