If you provide your workers with special perks, such as gym memberships or work vehicles for personal use, you are likely to be responsible for fringe benefit tax.
What is FBT?
FBT is a tax on the benefits you provide your employees with. It applies to things like:
work vehicles available for personal use
subsidies on gym memberships or insurance
discounted goods and services.
FBT would not apply to things already levied on the worker, such as:
salary and wages
cash bonuses
employee allowances
How FBT Operates
Four major classes of taxable fringe benefits exist:
motor vehicles available for personal use
free, subsidised or discounted goods and services
low-interest loans (other than those provided by life insurance companies)
employer contributions to sickness, accident or death benefit funds, specified insurance policies, and superannuation schemes not subject to employer superannuation contribution tax (ESCT).
You pay FBT on the cost of the benefit to the employee, eg the cost of the car for the portion of time it's available for personal use. When you first start giving your employees the benefit, you need to register for FBT with Inland Revenue. You can register online or by calling Inland Revenue.
Filing your FBT return
Three options are available for filing returns:
Quarterly.
Annually for the tax year.
Annually for your income year.
Depending on the type of business you have and how much tax you pay per year, your selection will be limited.
Common mistakes
Avoid these potential mistakes of FBT:
Many employers don't know they need to pay FBT until too late. If you find out after you've been providing taxable benefits for a while the tax payments will have to be backdated, which may result in a large bill.
FBT can be costly if you don't figure out the financial consequences, so work out if you'll be better off providing higher wages or monthly incentives instead.
Source: IRD
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