Question 4. FBT

Brian is a bank executive. As part of his remuneration package, his employer provided him with a three-year loan of $1m at a special interest rate of 1% pa (payable in monthly instalments). The loan was provided on 1 April 201W. Brian used 40% of the borrowed funds for income-producing purposes and met all his obligations in relation to the interest payments.

• Calculate the taxable value of this fringe benefit for the 201W/1X FBT year.
• Would you answer be different if the interest was only payable at the end of the loan rather than in monthly instalments?
• What would happen if the bank released Brian from repaying the interest on the loan?

(8+5+2 = 15 marks)