Fringe tax rate adjusted

Press, 14 March 1987, Page 32

Fringe tax rate adjusted

PA Wellington The Government has increased the interest rate used to assess fringe benefit tax on employ-ment-related loans. The Under-Secretary of Finance, Mr de Cleene, said the prescribed interest rate to apply from the quarter starting April 1 would be 17 per cent, up 3 per cent. Mr de Cleene said the new rate bore a closer relationship to the market interest rates. It would be used for calculation of the fringe benefit value of all reviewable interest rate loans whenever granted and also of non-review-able interest loans granted after March 31, 1985.

The fringe benefit tax is

calculated on the difference between the interest accruing each quarter at the prescribed rate and the actual interest accruing in that quarter. Where a non-review-able interest rate loan was provided before March 31, 1985, the nonconcessionary rate of interest as declared by Order-in-Council in March, 1985, would continue to apply. Mr de Cleene said the interest rate used for valuing employmentrelated loans would now be reviewed quarterly to allow for alterations in market interest rates. "It is only fair that fringe benefit tax should be calculated on the current value of the interest benefit,” he said.