Low Interest Loan Prescribed Rate
The low interest loan prescribed rate is the Inland Revenue interest figure employers use when a staff loan, salary advance, or overdrawn shareholder current account is cheaper than that rate. From 1 October 2026 the rate is 6.07%. From 1 January 2026 to 30 September 2026 it is 5.77%. Fringe benefit tax is charged on the interest gap, not on the dollars you lent.
Inland Revenue sets the rate and reviews it quarterly. You work the interest on the daily loan balance, then subtract the interest you actually charged. If what you charged is not lower than the prescribed figure for that day, there is no interest benefit to tax. A year times 6.07% on one balance is not the test. This page is the rate map.
Hamilton company, quarter that crosses 1 October
Situation: labelled Hamilton Ltd. Shareholder current account stays overdrawn through September and October 2026. No interest has been debited.
Action: 5.77% on the daily balance through 30 September 2026. 6.07% from 1 October 2026. Do not run 5.77% across the whole December quarter.
Auckland wage advance under $2,000
Situation: labelled Auckland employer. One staff member has $1,500 outstanding as an advance on future wages. The employment contract does not require that advance. It is not secured on a house.
Action: Inland Revenue’s wage advance exemption can apply. Combined outstanding must stay no more than $2,000. A mortgage does not get this exemption.
Tauranga cafe, no interest charged
Situation: labelled Tauranga cafe. Interest free loan to a manager so they can buy tools for home. Not a bank. Not the same credit the public can get.
Action: FBT is the prescribed interest on each day’s balance. You do not pay FBT on the principal. Do not multiply one balance by 6.07% and call that the quarter.
What rate applies on each day?
Use the rate in force on that day. Inland Revenue’s prescribed interest rates list is the working table. The Tax Administration (Fringe Benefit Tax, Interest on Loans) Determination 2026 is made under section 90B of the Tax Administration Act 1994. It sets 6.07% for the quarter commencing 1 October 2026 and later quarters until another determination replaces it. It was made on 26 August 2026 and comes into force on 1 October 2026. Inland Revenue’s news note is dated 8 September 2026.
| Period on the Inland Revenue list | Prescribed rate |
|---|---|
| From 1 October 2026 | 6.07% |
| 1 January 2026 to 30 September 2026 | 5.77% |
| 1 October 2025 to 31 December 2025 | 6.29% |
| 1 July 2025 to 30 September 2025 | 6.67% |
| 1 April 2025 to 30 June 2025 | 7.38% |
| 1 October 2023 to 31 March 2025 | 8.41% |
Inland Revenue: an increased rate applies from the start of the next quarter, provided the change is made at least 1 month before the quarter begins. A reduced rate can apply to the current quarter, provided the change is made at least 1 month before the quarter ends. Once set, 6.07% stays until a later determination under section 90B changes it.
How is the taxable value worked out?
Inland Revenue’s calculating the taxable value page: the fringe benefit is the difference between interest on the daily balance using the prescribed rate or market rate for the return period, and the interest charged on the loan for the period. You need the balance at the start of the quarter, every repayment or reduction and its date, and interest and other charges and their dates. Accrued interest follows the return period. Quarterly filers accrue each quarter.
Income year and annual returns: calculate the interest for each quarter at the rate applying on each day, then add the taxable values. Standard quarters may not line up with an income year. Some income years span 5 standard quarters. You still use the daily balance and the rate on each day. Who files, and the quarter dates, sit on FBT for employers.
Inland Revenue interest gap
Prescribed or market interest on the daily balance, minus interest you charged, equals the taxable value. Market rate is only for banks, financial institutions, and employers in a group of companies with a member in the business of lending money to the public. Everyone else uses the prescribed rate. Price a quarter after you have that gap on the FBT calculator. The rate you apply to the gap is a separate choice on single 63.93% vs alternate 49.25% and Q4.
Which loans count, and which do not?
Inland Revenue’s about low interest loans page treats a loan as all advances (including a salary advance), money loaned in any other way, any credit given (including delaying recovery of a debt), and an overdrawn current account of a shareholder. A loan from someone else on your behalf can still be yours. An associated company in a group that lends cheaply to your employee can put the FBT on you. Interest free expense accounts staff use for private goods and services are calculated on the daily balance at the prescribed or market rate.
You do not pay FBT on credit you offer employees on the same basis as the public, because the rate matches the public rate. A wage advance is out of FBT only when both of these hold: the combined amount outstanding for that employee is no more than $2,000, and the contract does not require you to make the advance. That exemption does not cover a loan secured on real property, such as a mortgage. Loans under an exempt employee share purchase scheme are not FBT. Other employee share loan conditions sit in Part 5 of IR409. A life insurer that lends to a New Zealand policy holder, or to an associated person of the holder, pays FBT as if the insurer were the employer and the loan were employment related.
Attribution is not optional for a normal staff loan. Inland Revenue: no annual threshold applies to low interest loan fringe benefits. You attribute the loan to the employee who receives it. The exception is loans to life insurance policy holders by life insurers: those can be pooled. When you use full or pooled alternate, that attribution still happens. There is no $2,000 pool threshold on this benefit type. The $2,000 figure on this page is only the wage advance exemption.
What people get stuck on
r/PersonalFinanceNZ treats an overdrawn shareholder account as a loan that needs the prescribed rate, or it falls into FBT. That matches Inland Revenue’s overdrawn current account rule. Charging at least the prescribed rate on the daily balance removes the interest gap. It does not delete the loan from your records. A thread that treats a company car loan as a way around FBT is a different benefit. This page is only the interest rate on the loan.
A 2026 accountant note that multiplies one balance by 5.77% and by 6.07% for a full year is a sketch. Inland Revenue wants each day’s balance and the rate on that day. A 2022 rate table that still stops at 8.41% from 1 October 2023 is behind the live list. A 2023 note that pairs use of money interest with a 6.71% prescribed rate is not the October 2026 figure. A 2015 Beehive release at 5.99% is history. Quora and Medium this run were not New Zealand loan rates. Stats NZ’s mortgage series page did not load, so this article does not describe a survey formula. The live instrument is the 26 August 2026 determination.