16Loan benefits

#### 16 Loan benefits (1) Where a person (in this subsection referred to as the provider) makes a loan to another person (in this subsection referred to as the recipient), the making of the loan shall be taken to constitute a benefit provided by the provider to the recipient and that benefit shall be taken to be provided in respect of each year of tax during the whole or a part of which the recipient is under an obligation to repay the whole or any part of the loan. > Note: A loan benefit that is taken under this subsection to be provided in respect of a year of tax may not be provided as a fringe benefit if: (a) the loan was made in that year of tax or a previous year of tax; and (b) a dividend is not taken to be paid under section 109D of the Income Tax Assessment Act 1936 in relation to the loan, because of section 109N of that Act. > Note: See paragraph (s) of the definition of fringe benefit in subsection 136(1) of this Act. (2) For the purposes of this Act, where: (a) a person (in this subsection referred to as the debtor) is under an obligation to pay or repay an amount (in this subsection referred to as the principal amount) to another person (in this subsection referred to as the creditor); (b) the principal amount is not the whole or a part of the amount of a loan; and (c) after the due date for payment or repayment of the principal amount, the whole or part of the principal amount remains unpaid; the following provisions have effect: (d) the creditor shall be deemed, immediately after the due date, to have made a loan (in this subsection referred to as the deemed loan) of the principal amount to the debtor; (e) at any time when the debtor is under an obligation to repay any part of the principal amount, the debtor shall be deemed to be under an obligation to repay that part of the deemed loan; (f) the deemed loan shall be deemed to have been made: (i) if interest accrues on so much of the principal amount as remains from time to time unpaid—at the rate of interest at which that interest accrues; or (ii) in any other case—at a nil rate of interest. (3) For the purposes of this Act, where a person (in this subsection referred to as the provider) makes a deferred interest loan (in this subsection referred to as the principal loan) to another person (in this subsection referred to as the recipient): (a) the provider shall be deemed, at the end of: (i) the period of 6 months commencing on the day on which the principal loan was made; and (ii) each subsequent period of 6 months; (being in either case a period ending on or after 1 July 1986 during the whole of which the recipient is under an obligation to repay the whole or any part of the principal loan) to have made a loan (in this subsection referred to as the deemed loan) to the recipient of an amount equal to the amount by which the interest (in this subsection referred to as the accrued interest) that has accrued on the principal loan in respect of that period exceeds the amount (if any) paid in respect of the accrued interest before the end of that period; (b) where any part of the accrued interest becomes payable or is paid after the time when the deemed loan is deemed to have been made, the deemed loan shall be reduced accordingly; and (c) the deemed loan shall be deemed to have been made at a nil rate of interest. (4) In subsection (3), deferred interest loan means a loan in respect of which interest is payable at a rate exceeding nil, other than: (a) a loan where the whole of the interest is due for payment within 6 months after the loan is made; or (b) a loan where: (i) the interest is payable by instalments; (ii) the intervals between instalments do not exceed 6 months; and (iii) the first instalment is due for payment within 6 months after the loan is made. (5) For the purposes of this Act, where no interest is payable in respect of a loan, a nil rate of interest shall be taken to be payable in respect of the loan.