Division 7A benchmark interest rate

Taxation Determination TD 2014/20 (published on 16 July 2014) specifies that for the income year commencing on 1 July 2014, the benchmark interest rate is 5.95 per cent per annum for the purposes of the deemed dividend provisions in sections 109N and 109E of Division 7A of the Income Tax Assessment Act 1936. Paragraph two of TD 2014/20 states that this benchmark interest rate is relevant to private company loans made or deemed to have been made after 3 December 1997 and before 1 July 2014, and to trustee loans made after 11 December 2002 and before 1 July 2014.

The rate is used to:

  • determine if a loan made in the 2013-14 income year is taken to be a dividend, and
  • calculate the amount of the minimum yearly repayment for the 2014-15 income year on an amalgamated loan taken to have been made prior to 1 July 2014.

It is important to note that TD 2014/20 only applies where a private company or trustee, which either made the loan or is taken to have made the amalgamated loan, has an income year that commenced on 1 July 2014.

Where the private company or trust has a substituted accounting period, commencing on a date other than 1 July, taxpayers need to refer to Taxation Determination TD 2001/18 which explains how to find the benchmark interest rate.