3.9.3.33 Employer Provided Benefits - School Fees, Private Health Insurance & Low Interest Loans

Summary

This topic contains information on the assessment, as income for the CSHC income test, of employer provided:

• school fee payments,
• private health insurance, and
• low interest loans.

Definition & assessment of school fee payments

A person receives a school fee benefit if their employer pays an amount to them, or to a school, for a primary or secondary level education, tuition, book or equipment fees for:

• a dependent child (1.1.D.70) of the person or person's partner (1.1.P.70), OR
• a child who would be a dependent child of the family but is getting NSA or SA.

The value of a school fees payment is the actual amount of the payment.

Definition & assessment of private health insurance

A person receives a health insurance benefit if their employer pays an amount to them, or to a health insurance fund, for the cost of health insurance that covers:

• the person, OR
• their partner, OR
• a dependent child of the person or their partner, OR
• a child who would be a dependent child of the family but is getting NSA or SA.

The value of a health insurance benefit is the actual amount of the payment.

Definition of low interest loans

A person receives a low interest loan benefit if their employer makes a loan to them. A loan includes:

• an advance of money,
• the provision of credit or any other form of financial arrangement,
• the payment of an amount for, on account of, on behalf of, or at the request of a person, where there is an obligation to repay the amount, or
• a transaction which has the effect of a loan of money.

Explanation: An advance from an employer to cover 'set up' costs is NOT considered to be a loan.

Example: Set up costs include security deposits for electricity, phone services or rental bonds.

A loan is EXEMPT if:

• the interest rate applied to it equals, or is greater than, the applicable notional interest rate, or
• it is a housing loan to a member of the Defence Force made by the Defence Force or its agent.

Notional interest rates

The notional interest rate for any tax year is the lowest commercial market rate of interest at 1 April in the preceding tax year. The following table shows the notional interest rate applying to housing loans and other loans since 1992-93.

Assessment of low interest loans

The value of a loan benefit is determined using the following formula:

(notional interest rate - actual interest rate) x outstanding loan amount x part of the year the employee (1.1.E.87) has the loan.

Example: At the end of the 1996-97 tax year, an employee still owed $3,000 on a loan made on 1 September 1997 at 5%. The employee had the loan for 9/12s of the year. The notional interest rate for that year is 10.4%. Using the formula, the loan benefit value is:

(10.4 - 5%) x $3,000 x 9/12

= 5.4% x $3,000 x 9/12

= $162 x 9/12

= $121.50.

Loan rates and outstanding loan amounts, can vary over time and within a tax year. The following table shows the appropriate interest rate and outstanding loan amount to apply for a loan starting at a given time of the tax year.

Act reference: SSAct section 1157Q(5) The actual rate of interest for the loan is…, section 1157Q(6) The amount of the loan that is outstanding is…

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Last reviewed: 11 August 2011