Questions about FBT & staff loans:
- If you provide a staff loan, then you must charge the FBT benchmark rate of interest to avoid any FBT liability?
- If you provide a loan to staff to buy shares as an investment, will the interest be “otherwise deductible” for FBT purposes?
- Does it make any difference if the shares are in the employers’ company?
- If “otherwise deductible”, can the interest cost be Salary Sacrificed with no FBT applying?
- The answer is… generally yes unless the otherwise deductible rule applies and the benchmark rate of interest is 5.45%.
- If there is a realistic expectation that the shares will derive dividends at some point, then the otherwise deductible rule will apply meaning no FBT will be payable even if the interest is not paid. What happens here is that the taxable value of the loan benefit is reduced if the funds are used to derive assessable income by the employee.
- If the shares are in the employer’s company, then for obvious reason… No employee declaration is required. The employer already knows how then funds are being used
- it is quite possible to formalise this arrangement as a salary sacrifice with the employee when negotiating their employment package.