Div 7A benchmark interest rate for 2012-13: Taxation Determination TD 2012/15

On 27 June 2012, the Commissioner of Taxation released Taxation Determination TD 2012/15 "Income tax: what is the benchmark interest rate applicable for the year of income that commenced on 1 July 2012 for the purposes of Division 7A of Part III of the Income Tax Assessment Act 1936 and how is it used?"

This Determination states that for the income year that commences on 1 July 2012, the benchmark interest rate for the purposes of sections 109N and 109E of the ITAA 1936 is 7.05% (down from 7.80% per annum for 2011-12).

The benchmark interest rate is the same as the Indicator Lending Rates - Standard Bank Variable Housing Loans Interest Rate last published by the Reserve Bank of Australia before the start of the income year: section 109N(2) of the ITAA 1936.

The benchmark interest rate is relevant to private company loans made or deemed to have been made after 3 December 1997 and before 1 July 2011; and to trustee loans made after 11 December 2002 and before 1 July 2012. It is used to:

• determine if a loan made in the 2011-12 income year is taken to be a dividend (section 109N(1)(b) and as applicable, section 109D(1) or section 109XB); and
• calculate the amount of the minimum yearly repayment for the 2012-13 income year on an amalgamated loan taken to have been made prior to 1 July 2012 (section 109E(5)).

The Determination also states that for private companies with substituted accounting periods, Taxation Determination TD 2001/18 "Income tax: which benchmark interest rate does a private company with a substituted accounting period in lieu of the year of income ending on 30 June use for the purposes of Division 7A of Part III of the Income Tax Assessment Act 1936 ('The Act')?" applies.

Notified in the Commonwealth Gazette No GN 25, 27 June 2012 [p 1597]

LTA.TaxNewsroom@thomsonreuters.com

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