(1) This is how to work out the value of a loan fringe benefit:

Method statement

Step 1. Work out whether the loan is a housing loan or another type of loan.

Note:
For ** housing loan **see subsection 10A(9).

Step 2. Work out the notional rate of interest for the loan using subsection (2), (3) or (4).

Step 3. Work out the actual rate of interest for the loan in the appropriate tax year using subsection (5).

Step 4. Work out whether the actual rate of interest exceeds the notional rate of interest.

Step 5. If the actual rate of interest is equal to or exceeds the notional rate of interest, the value of the loan fringe benefit is nil.

Note: If the value of the loan fringe benefit is nil, you do not have to go any further in the Method statement.

Step 6. If the actual rate of interest is less than the notional rate of interest, take the actual rate of interest away from the notional rate of interest.

Step 7. Work out the amount of the loan (both the principal and interest) that is outstanding in the appropriate tax year using subsection (6).

Step 8. Multiply the rate of interest obtained in Step 6 and the
amount obtained in Step 7: the result is the ** interim value of the loan **.

Step 9. Work out how many complete weeks in the appropriate tax
year the person had or will have the loan: the result is the ** number of
allowable weeks **.

Step 10. Apply the formula:

Step 11.
The amount obtained by applying the formula in Step 10 is the ** value of the
loan fringe benefit **.

Note: If the person is a member of a couple, the value of the loan fringe benefit is to be halved in certain circumstances (see subsection (7)).

(2) The notional rate of interest for the tax year ending 30 June 1993 is:

(a) 10% for a housing loan; and

(b) 13.5% for any other loan.

(3) The notional rate of interest for the tax years ending 30 June 1994 and 30 June 1995 is:

(a) 6.95% for a housing loan; and

(b) 11.75% for any other loan.

(4) The notional rate of interest for any subsequent tax year is the market rate of interest for 1 April in the preceding tax year.

(4A) For the purposes of subsection (4):

**
"market rate of interest" **, for a particular day, means:

(a) for a housing loan--the lowest variable rate of interest for a housing loan; or

(b) for any other loan--the lowest variable rate of interest for any other loan;

that is available on that day from a bank which is one of 4 banks specified in a determination made, by legislative instrument, by the Minister.

(5) The actual rate of interest for the loan is:

(a) if the loan starts after 1 July in the appropriate tax year--the rate of interest that is payable under the loan on the day on which the loan starts; and

(b) in any other case--the rate of interest that is payable under the loan on 1 July in the appropriate tax year.

(6) The amount of the loan that is outstanding is:

(a) if the loan starts after 1 July in the appropriate tax year--the amount that is outstanding on the day on which the loan starts; and

(b) in any other case--the amount that is outstanding on 1 July in the appropriate tax year.

(7) If:

(a) the person is a member of a couple; and

(b) the person's partner receives a loan fringe benefit in the appropriate tax year; and

(c) the person's and the partner's loan fringe benefits relate to the same loan;

the value of the loan fringe benefit obtained in Step 11 of the Method statement is to be halved.