FRINGE BENEFIT TAX (FBT)

Do you offer fringe benefits to your employees?

While we understand that Fringe Benefit Tax (FBT) can, at times, be overwhelming, it's essential to get it right. Below is a brief overview we have put together to ensure that employers meet their FBT requirements to avoid late payment penalties and interest. 20 July 2023 is the due date for the next quarterly FBT return and for those that file FBT returns.

What is fringe benefits tax?

Fringe Benefit Tax (FBT), is a taxable non-cash benefit provided and enjoyed by an employee as a result of their employment relationship that is in addition to wages or salary. As an employer you may be liable for tax (FBT) on certain benefits provided to employees. The most common are:

· Motor vehicles provided by the business for the employees' private use.

Free, subsidized or discounted goods and services.

· Low-interest loans.

· Employer contributions to sickness, accident or death benefit funds, superannuation schemes.

When to file your FBT return:

As an employer, you are required to file your FBT return either quarterly, annually or by income year. Your choice will depend on the type of company you manage, whether you were an employer in the previous year, the benefits you provide and how much tax you pay.

FBT calculation methods:

There are three different types of FBT rates: singe rate, shortform alternate rate, and full alternate rate.

If you file an annual return, you can choose any of the three FBT rates and change rates from year-to-year. If you file quarterly, you can swap between FBT rates during the year. However, if you elect and pay FBT using the alternate rate in any of the first three quarters, you must complete the alternate rate calculation process in the fourth and final quarter.

For more in-depth information on how to calculate your fringe tax liability, please refer to the formulas provided by IRD in their FBT guide which can be found by visiting this link: www.ird.govt.nz/employing-staff/paying-staff/fringebenefit-tax

IRD Recent Updates – 2023 Budget

The Government has announced its Budget for 2023 last month which included three revenue measures:

· Raising the trustee tax rate from 33% to 39% to align it with the top personal income tax rate for the 2024-25 and later income years effective from 1 April 2024.

· From 1 July 2024, Government will make a three percent Kiwisaver contribution to recipients of Paid Parental Leave who make their own contribution of at least 3%.

The Budget also reflects an increase in revenue from imposing a tax on some large multinational enterprises operating in New Zealand.

For full details of all Budget announcements, see the Treasury website www.treasury.govt.nz

If you have any further questions or would like to discuss this matter, please do not hesitate to contact Logan Granger.

Disclaimer – While all care has been take, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this article; always see your professional advisor before taking any action that you are unsure about.