Fringe Benefit Tax
Fringe Benefit Tax (FBT) is a tax on benefits that employees receive as a result of their employment, including those benefits provided through someone other than an employer.
The four main groups of fringe benefits are:
- Motor vehicles (refer to the IRD website for more information on how to calculate)
- Low-interest loans other than low-interest loans provided by life insurance companies
- Free, subsidised or discounted goods and services, including subsidised transport for employers in the public transport business
- Employer contributions to sick, accident or death benefit funds, superannuation schemes and specified insurance policies
Fringe Benefit Tax is payable quarterly (however some employers may be able to elect payments filing on an annual basis).
There are three types of FBT rates from which you can choose; single rate, short form alternate rate and full alternate rate. If you file an annual return, you can choose any of the three FBT rates an change rates from year-to-year. If you file quarterly, you can swap between FBT rates during the year. However, if you elect an 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.
There are various factors that should be considered when deciding which FBT rate to apply to the fringe benefits you provide, such as;
- The additional time and possible set-up costs to complete the alternate rate calculations.
- The impact of non-attributed benefits. If you provide a number of non-attributed benefits you should consider using the alternate rate calculation option.
- The amount your employees earn annually. You should consider using the single rate if you have employees earning over $70,000, or one of the alternate rate calculations if you have employees earning less than $70,000.
FBT - Single Rate
The single rate is 49.25%, applied to all fringe benefits provided. This is the highest FBT rate.
FBT - Short Form Alternate Rate
The short form alternate rate is 49.25% for all attributed benefits and non-attributed benefits provided to major shareholder-employees and 42.86% for non-attributed benefits.
Full Alternate Rate
The full alternate rate applies to attributed benefits only and a separate calculation must be done for each employee. The rates are based on an employee’s fringe benefit inclusive cash remuneration (FBICR) as per below:
- 73% for FBICR of $0 to $12,530
- 21% for FBICR of $12,531 to $40,580
- 86% for FBICR of $40,581 to $55,980
- 25% for FBICR of over $55,981
Refer to the IRD website for more information on how fringe benefit tax is applied and calculated.
If you would like further information on whether FBT is payable in your situation and how this is calculated just give us a call.