Low interest loans (Fringe benefit tax on specific categories of benefits

By: Inland Revenue Department  06-Dec-2011
Keywords: Fringe Benefit Tax, Fringe Benefit, Low Interest Loans

Rules have changed for employers who are, like banks or financial institutions, lending money to members of the public. Those employers can now choose to value low interest loans provided to employees using either the prescribed rate or alternatively a market rate. Certain criteria apply to what constitutes a market rate. For all other employers the value of the loans must continue to be calculated using the prescribed rates issued by Inland Revenue quarterly.

These are the FBT prescribed interest rates, which are used to determine the fringe benefit value of low-interest loans provided to employees.

Learn about the FBT liability for current account debit balances, expense accounts, and loans to life insurance policyholders.

The FBT prescribed interest rates for the years 1993 to 1999 that are used to determine the fringe benefit value of low-interest loans provided to employees.

A low-interest loan to employees may not be subject to fringe benefit tax if the loan credit is the same as normal commercial credit or if it is an employee share-purchase scheme. Learn about these circumstances.

In most cases, your existing records will provide enough information to work out the value of low-interest loans for FBT purposes. See if you need to keep any extra records regarding accrued interest, the daily balance of the loans, and non-reviewable interest rates.

FBT is calculated on loans by comparing the interest on the loan with the interest calculated using the prescribed rate.

Date published: 14 Oct 2004

Keywords: Fringe Benefit, Fringe Benefit Tax, Low Interest Loans

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