The benchmark interest rate for the 2017/18 FBT year is 5.25% p.a. (5.65% applied in 2016/17).
This rate is used to calculate the taxable value of:
- a loan fringe benefit; and
- a car fringe benefit where an employer chooses to value the benefit using the operating cost method.
On 1 April 2017 an employer lends an employee $50,000 for five years at an interest rate of 5% p.a., with interest being charged and paid 6 monthly, and no principal repaid until the end of the loan.
The actual interest payable by the employee for the current year is $2,500 ($50,000 × 5%). The notional interest, with a 5.25% benchmark rate, is $2,625.
Therefore, the taxable value of the loan fringe benefit is $125 (i.e., $2,625 – $2,500).