Less interest on employee loans 11 Nov 2020

Inland Revenue has reduced the amount of interest you need to charge an employee, if you give them a loan. 

Provided you charge at least 4.5 percent from 1 July 2020, there will be no fringe benefit tax liability. This is down from the previous figure of 5.26 percent.

If your business is run through a company and you overdraw your current account with the business, you would also be liable to pay interest on the amount overdrawn.

We have mentioned this before but it will not hurt to remind you – if you cease business as a company and draw out all the money, you could be liable to pay interest.

Companies, unless they are Look-through Companies, are only allowed to pay out their capital profits if the company is in the process of winding up its affairs.

It does not get into the process of winding up until a suitable minute has been signed. Therefore early withdrawals of money have to be treated as loans.

Subscribe to e-news

Proud supporters of:


If you'd like to know more about these accounting service packages please contact us or click on the relevant logo.

Contact info

Level 11
AIA Tower
34-42 Manners Street

T: 04 499 3903
F: 04 499 3913