PART III
-
FRINGE BENEFITS
Division 4
-
Loan fringe benefits
Subdivision B
-
Taxable value of loan fringe benefits
SECTION 19
REDUCTION OF TAXABLE VALUE
-
OTHERWISE DEDUCTIBLE RULE
19(1)
Where:
(a)
the recipient of a loan fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer; and
(b)
if the recipient had, on the last day of the period (in this subsection called the
loan period
) during the year of tax when the recipient was under an obligation to repay the whole or any part of the loan, incurred and paid unreimbursed interest (in this subsection called the
gross interest
), in respect of the loan, in respect of the loan period, equal to the notional amount of interest in relation to the loan in relation to the year of tax
-
a once-only deduction (in this subsection called the
gross deduction
) would, or would if not for Divisions
28
and
900
of the
Income Tax Assessment Act 1997
, have been allowable to the recipient under that Act or the
Income Tax Assessment Act 1936
in respect of the gross interest; and
(ba)
the amount (in this subsection called the
notional deduction
) calculated in accordance with the formula:
where:
GD
is the gross deduction; and
RD
is:
(i)
if no interest accrued on the loan in respect of the loan period
-
nil; or
(ii)
if interest accrued on the loan in respect of the loan period
-
the amount (if any) that would, or that would but for Divisions
28
and
900
of the
Income Tax Assessment Act 1997
, have been allowable as a once-only deduction to the recipient under that Act or the
Income Tax Assessment Act 1936
in respect of that interest if that interest had been incurred and paid by the recipient on the last day of the loan period;
exceeds nil; and
(c)
except where the fringe benefit is:
(i)
an employee credit loan benefit in relation to the year of tax; or
(ii)
an employee share loan benefit in relation to the year of tax;
the recipient gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, in respect of the loan concerned; and
(ca)
where:
(i)
(Repealed by No 178 of 1999)
(ii)
the loan fringe benefit is a car loan benefit in respect of a car held by the recipient during a period (in this subsection also called the
holding period
) in the year of tax; and
(iii)
the substantiation rules set out in Division
15
have been complied with in relation to the car in relation to the holding period;
the following conditions are satisfied:
(iv)
the recipient gives to the employer, before the declaration date, a car substantiation declaration for the car for the year of tax;
(v)
in a case where the substantiation rules require log book records or odometer records to be maintained by or on behalf of the recipient in relation to the car
-
the car substantiation declaration is accompanied by a copy of those documents; and
(d)
if:
(i)
paragraph
(ca)
does not apply; and
(ii)
the loan fringe benefit is a car loan benefit in respect of a car held by the recipient during a period (the
holding period
) in the year of tax;
the recipient gives a declaration to the employer, before the declaration date and in a form approved by the Commissioner, that purports to set out:
(iii)
the holding period; and
(iv)
the number of whole business kilometres travelled by the car during the holding period; and
(v)
the number of whole kilometres travelled by the car during the holding period;
the taxable value, but for Division
14
, of the loan fringe benefit in relation to the year of tax is the amount calculated in accordance with the formula:
where:
TV
is the amount that, but for this subsection and Division
14
, would be the taxable value of the loan fringe benefit in relation to the year of tax; and
ND
is:
(e)
if neither paragraph
(ca)
nor
(d)
applies and paragraph
(i)
does not apply
-
the notional deduction; or
(f)
if paragraph
(ca)
applies and paragraph
(i)
does not apply
-
whichever of the following amounts is applicable:
(i)
if it would be concluded that the amount of interest that has accrued on the loan in respect of the loan period would have been the same even if the loan fringe benefit were not applied or used in producing assessable income of the recipient
-
the business use percentage of the amount that, but for this subsection and Division
14
, would be the taxable value of the loan fringe benefit in relation to the year of tax;
(ii)
if subparagraph
(i)
does not apply
-
the business use percentage of the notional amount of interest in relation to the loan in relation to the year of tax; or
(g)
where:
(i)
paragraph
(d)
applies; and
(ii)
(Repealed by No 162 of 2015)
(iia)
paragraph
(i)
does not apply;
whichever of the following amounts is the least:
(iii)
the notional deduction;
(iv)
if it would be concluded that the amount of interest that has accrued on the loan in respect of the loan period would have been the same even if the loan fringe benefit were not applied or used in producing assessable income of the recipient
-
33
⅓
% of the amount that, but for this subsection and Division
14
, would be the taxable value of the loan fringe benefit in relation to the year of tax;
(v)
if subparagraph (iv) does not apply
-
33
⅓
% of the notional amount of interest in relation to the loan in relation to the year of tax; or
(h)
(Repealed by No 162 of 2015)
(i)
if, under subsection
138(3)
, the loan fringe benefit is deemed to have been provided to the recipient only
-
the amount calculated in accordance with subsection
(5)
.
History
S 19(1) amended by No 84 of 2022, s 3 and Sch 3 items 1
-
3, by omitting
"
section 82A of the
Income Tax Assessment Act 1936
, and
"
before
"
Divisions 28 and 900 of the
Income Tax Assessment Act 1997
"
from para (b), substituting
"
that Act or the
Income Tax Assessment Act 1936
"
for
"
either of those Acts
"
in para (b) and substituting
"
Divisions 28 and 900 of the
Income Tax Assessment Act 1997
, have been allowable as a once-only deduction to the recipient under that Act or the
Income Tax Assessment Act 1936
"
for
"
section 82A of the
Income Tax Assessment Act 1936
, and Divisions 28 and 900 of the
Income Tax Assessment Act 1997
, have been allowable as a once-only deduction to the recipient under the
Income Tax Assessment Act 1936
or the
Income Tax Assessment Act 1997
"
in para (ba) subpara (ii) of the definition of
"
RD
"
, effective 1 January 2023 and applicable to the FBT year starting on 1 April 2023 and to later FBT years.
S 19(1) amended by No 162 of 2015, s 3 and Sch 1 items 4
-
6, by substituting para (d), repealing para (g)(ii) and para (h), applicable in relation to the 2016-17 FBT year and later FBT years. Para (d), (g)(ii), and (h) formerly read:
(d)
where paragraph (ca) does not apply and the loan fringe benefit is a car loan benefit in respect of a car held by the recipient during a period (in this subsection also called the
holding period
) in the year of tax, the recipient gives to the employer, before the declaration date:
(i)
a declaration, in a form approved by the Commissioner, that purports to set out:
(A)
the holding period; and
(B)
the number of whole business kilometres travelled by the car during the holding period; and
(C)
the number of whole kilometres travelled by the car during the holding period; or
(ii)
where the average number of business kilometres per week travelled by the car during the holding period exceeded 96:
(A)
a declaration referred to in subparagraph (i); or
(B)
a declaration, in a form approved by the Commissioner, that purports to set out the holding period and includes a statement by the recipient that the average number of business kilometres per week travelled by the car during the holding period exceeded 96;
(g)(ii)
a declaration referred to in subparagraph (d)(i) has been given to the employer; and
(h)
where:
(i)
subparagraph (d)(ii) applies; and
(ii)
a declaration referred to in subparagraph (d)(i) has not been given to the employer; and
(iia)
paragraph (i) does not apply;
whichever of the following amounts is applicable:
(iii)
if it would be concluded that the amount of interest that has accrued on the loan in respect of the loan period would have been the same even if the loan fringe benefit were not applied or used in producing assessable income of the recipient
-
33
⅓
% of the amount that, but for this subsection and Division
14
, would be the taxable value of the loan fringe benefit in relation to the year of tax;
(iv)
if subparagraph (iii) does not apply
-
33
⅓
% of the notional amount of interest in relation to the loan in relation to the year of tax; or
S 19(1) amended by No 145 of 2008, s 3 and Sch 4 items 42 to 45, by inserting
"
and
"
at the end of paras (a), (b), (ba), (c) and (d)(i)(A) and inserting
"
or
"
at the end of paras (e) and (f)(ii) of the definition of
"
ND
"
, effective 9 December 2008.
S 19(1) amended by No 145 of 2008, s 3 and Sch 4 items 1 to 7, by inserting
"
and paragraph (i) does not apply
"
after
"
applies
"
in paras (e) and (f) of the definition of
"
ND
"
, inserting
"
and
"
at the end of para (g)(ii) of the definition of
"
ND
"
, inserting para (g)(iia) in the definition of
"
ND
"
, inserting
"
and
"
at the end of para (h)(ii) of the definition of
"
ND
"
, inserting para (h)(iia) in the definition of
"
ND
"
and inserting para (i) at the end, applicable to a loan benefit that is provided after 7.30pm, by legal time in the Australian Capital Territory, on 13 May 2008 (the
commencing time
). However, the amendments do not apply to a loan benefit that is provided after the commencing time and before 1 April 2009 if the loan was entered into before the commencing time.
S 19(1) amended by
No 143 of 2007
, s 3 and Sch 1 items 9 and 10, by omitting
"
, other than a foreign income deduction,
"
after
"
the
gross deduction
)
"
in para (b) and omitting
"
other than a foreign income deduction
"
after
"
once-only deduction
"
in para (ba)(ii), applicable in relation to income years, statutory accounting periods and notional accounting periods starting on or after the first 1 July that occurs after 24 September 2007.
No 143 of 2007
, s 3 and Sch 1 Part 6 contains the following savings provisions:
Part 6
-
Savings provisions
Object
225
The object of this Part is to ensure that, despite the repeals and amendments made by this Act, the full legal and administrative consequences of:
(a)
any act done or omitted to be done; or
(b)
any state of affairs existing; or
(c)
any period ending;
before such a repeal or amendment applies, can continue to arise and be carried out, directly or indirectly through an indefinite number of steps, even if some or all of those steps are taken after the repeal or amendment applies.
Making and amending assessments, and doing other things, in relation to past matters
226
Even though an Act is repealed or amended by this Act, the repeal or amendment is disregarded for the purpose of doing any of the following under any Act or legislative instrument (within the meaning of the
Legislative Instruments Act 2003
):
(a)
making or amending an assessment (including under a provision that is itself repealed or amended);
(b)
exercising any right or power, performing any obligation or duty or doing any other thing (including under a provision that is itself repealed or amended);
in relation to any act done or omitted to be done, any state of affairs existing, or any period ending, before the repeal or amendment applies.
Example:
For the 2006-07 income year, Smart Investor Pty Ltd, an Australian resident private investment company, has assessable foreign income in the passive income class on which it has paid foreign tax for which it wishes to claim a foreign tax credit. The company also has a tax loss for the year from its Australian investments. When it lodges its tax return for the year it does not elect to claim a deduction for any of the tax loss under section
79DA
of the ITAA 1936, because the Australian tax payable on its passive foreign income equals the foreign tax it has paid.
In 2009 the amount of foreign tax payable in respect of some foreign rental income it had included in its return for the 2006-07 year is reduced and Smart Investor receives a refund of the difference in foreign tax. Smart Investor Pty Ltd then applies to be able to make an election under section
79DA
, that is, after the
Tax Laws Amendment (2007 Measures No 4) Act 2007
(which repeals section
79DA
) receives Royal Assent. The Commissioner allows Smart Investor to submit an election to claim a deduction for so much of its 2006-07 tax loss as to reduce the amount of Australian tax payable on its 2006-07 assessable foreign income to the revised foreign tax paid, by the end of 2009.
Despite the repeal of section
79DA
, item 226 allows the Commissioner to permit an election to be lodged after the return for 2006-07 has been lodged, and to amend Smart Investor
'
s assessment for that year, because these actions relate to a thing done, and period ending, before the repeal of section
79DA
applies.
S 19(1) amended by
No 101 of 2006
, s 3 and Sch 2 items 81
-
82, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the
CCH Australian Income Tax Legislation archive
.
S 19(1) amended by No 178 of 1999, No 39 of 1997, No 145 and No 30 of 1995, No 48 of 1991, No 11 of 1989 and No 139 of 1987.
19(2)
Where a part of a loan to which a loan fringe benefit relates is used by an employee to:
(a)
purchase a particular car; or
(b)
pay a Division 28 car expense;
subsection
(1)
and the definition of
car loan benefit
in subsection
136(1)
apply as if that part of the loan had been a separate loan.
History
S 19(2) amended by No 178 of 1999, No 39 of 1997 and substituted by No 139 of 1987.
19(3)
(Repealed by No 162 of 2015)
History
S 19(3) repealed by No 162 of 2015, s 3 and Sch 1 item 7, applicable in relation to the 2016-17 FBT year and later FBT years. S 19(3) formerly read:
19(3)
Where:
(a)
apart from this subsection, paragraph (1)(ca) applies in relation to a fringe benefit in relation to an employer in respect of a car held by the recipient during a period in the year of tax; and
(b)
whichever of the following amounts is the greater exceeds the amount that, apart from this subsection, would be ascertained under paragraph (1)(f) as representing the component ND in the formula in subsection (1):
(i)
in all cases
-
the amount that would have been ascertained under paragraph (1)(g) as representing that component if:
(A)
paragraph (1)(d) had applied in relation to the fringe benefit; and
(B)
a declaration of the kind referred to in subparagraph (1)(d)(i) had been given to the employer;
(ii)
in a case where the average number of business kilometres per week travelled by the car during the holding period exceeded 96
-
the amount that would have been ascertained under paragraph (1)(h) as representing that component if:
(A)
subparagraph (1)(d)(ii) had applied in relation to that fringe benefit; and
(B)
a declaration of the kind referred to in subparagraph (1)(d)(i) had not been given to the employer; and
(C)
a declaration of the kind referred to in sub-subparagraph (1)(d)(ii)(B) had been given to the employer;
this Act applies, and shall be deemed always to have applied, as if the amount represented by that component had been calculated as mentioned in whichever of subparagraphs (b)(i) or (ii) of this subsection is applicable.
S 19(3) amended by No 145 of 2008, s 3 and Sch 4 item 46, by inserting
"
and
"
at the end of para (b)(ii)(A), effective 9 December 2008.
S 19(3) inserted by No 139 of 1987.
19(4)
(Repealed by No 162 of 2015)
History
S 19(4) repealed by No 162 of 2015, s 3 and Sch 1 item 7, applicable in relation to the 2016-17 FBT year and later FBT years. S 19(4) formerly read:
19(4)
Nothing in section
74
prevents the amendment of an assessment for the purpose of giving effect to subsection (3).
S 19(4) inserted by No 139 of 1987.
19(5)
For the purposes of paragraph
(1)(i)
(which applies to a loan fringe benefit that, under subsection
138(3)
, is deemed to have been provided to an employee only), the amount is calculated in accordance with the formula:
| Unadjusted ND
×
Employee
'
s percentage of interest |
where:
employee
'
s percentage of interest
:
(a) is the percentage of the interest held by the employee, during a period (in this subsection called the
holding period
) in the year of tax, in the asset or other thing that:
(i) is purchased or paid for using all or part of the loan to which the loan fringe benefit relates; and
(ii) is applied or used for the purpose of producing assessable income of the employee; and
(b) does not include the percentage of the interest held in that asset or other thing by the employee
'
s associate or associates during the holding period.
unadjusted ND
is the amount that would be ascertained as representing the component ND in the formula in subsection
(1)
if paragraph
(1)(i)
did not apply in relation to the loan fringe benefit.
History
S 19(5) inserted by No 145 of 2008, s 3 and Sch 4 item 8, applicable to a loan benefit that is provided after 7.30pm, by legal time in the Australian Capital Territory, on 13 May 2008 (the
commencing time
). However, the amendments do not apply to a loan benefit that is provided after the commencing time and before 1 April 2009 if the loan was entered into before the commencing time.
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