If you provide low-interest loans, the fringe benefit tax (FBT) you pay is based on the interest benefit provided to your employee.
Taxable value of interest
The taxable value of the fringe benefit is the difference between:
- the interest calculated on the daily balance of the loan using the prescribed rate or market rate for the return period
- the interest charged on the loan for the period.
Income and annual year FBT returns
If you complete income year or annual returns, you must calculate the interest for each quarter using the prescribed rate or market rate applying on each day and add the 4 taxable values together to get the total for the return period.
For income year returns, the standard quarters may not align. You must still calculate the interest on the daily balance of the loan, using the prescribed rate or market rate applying on each day. This means that some income years may span 5 standard quarters.
Accrued interest
Accrued interest must be calculated based on your return period. For example, each quarter if you file quarterly returns.
Daily loan balance
You must work out the interest on the daily loan balance using the prescribed rate or market rate of interest. To work out the daily balance, you need:
- the loan balance at the beginning of the quarter
- all repayments or reductions to the loan and the dates
- interest and other charges incurred and the dates.
More information
Work out taxable value and file an FBT return
Information for completing FBT worksheets
Prescribed interest rates for low-interest loans