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Fringe benefit tax (FBT)

Fringe benefit tax on specific categories of benefits: Low-interest loans

Record keeping for low-interest loans

Requirements for all records

With all the records detailed below, include:

  • the date of the transaction
  • the name of the employee receiving the benefit
  • a description of the benefit provided
  • the cost to the employee
  • the cost to the employer.

The Fringe benefit tax guide (IR409) gives more information on the records you should keep.

Accrued interest

If you do not calculate the accrued interest each quarter, you must change your system so that you record interest quarterly for FBT purposes.

Daily balance of the loan

You must work out the interest on the daily balance of the loan using the prescribed or market interest rates.

To work out the daily balance, you need to know:

  • the loan balance at the beginning of the quarter
  • all repayments or reductions to the loan, and the dates
  • the interest and other charges incurred, and the dates.


Employers who are banks or financial institutions lending money to members of the public 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 be calculated using the prescribed rates issued by the department quarterly.

Non-reviewable interest rates

If a loan is subject to a non-reviewable rate of interest, keep a copy of the original loan agreement. This loan agreement should include:

  • the interest rate payable
  • a clause stating that the rate is not reviewable
  • the date when the agreement was signed.