It turns out that the tax officer already has: Employee Benefits Tax, or FBT, is a tax on benefits in kind that employees (including shareholders) receive or receive. These “marginal benefits” are not income in the traditional sense, so they are not subject to income tax, but FBT recognizes that they are still essentially a payment for services rendered and taxes them accordingly. An employer must register with the Internal Revenue Service (IRD) for FBT when you first provide benefits to employees, shareholders, or others associated with your business. As an employer, you pay FBT for most of the benefits and benefits you provide to your employees, their families or other employees, even if you have entered into an agreement with a third party to deliver the goods or services to your employees on your behalf. The legislation governing what is and is not an ancillary service is found in Part CX of the Income Tax Act, 2007. [1] The taxation of FBT is included in Part RD of the Income Tax Act, 2007. [2] Another option available to shareholders` employees, as long as their company does not offer other benefits, is to divide vehicle costs (acquisition and operating costs) based on actual business and personal use. This option would require that a usage log be kept every three years for a period of three months. Automated GPS tracking options are also available. FBT is a tax levied on non-monetary benefits granted to employees by employers in the context of an employment relationship.

Payments made by the employer on behalf of an employee generally do not require a FBT payment. (However, they may be subject to CAFE rules). In the current economic environment of COVID-19, most companies are thinking about how to reduce their costs. One area that is often overlooked is the benefits tax (FBT), with many employers unaware of the number of different calculation options and possible exemptions available to them. With the recent increase in FBT rates and TFF yields in the fourth quarter (Q4) in March 2022, expected by May 31, 2022, the time has come for employers to review their FBT agreements. Read on for a brief overview of tips and tricks, as well as common pitfalls that employers should be aware of when preparing FBT Q4 returns. If these benefits are appreciated or received by employees as a result of their employment, they are responsible for FBT. These can be past, present or even future jobs. Employers pay taxes on employee or employee-shareholder benefits, even if the benefits are provided by another person or organization. Employers also pay FBT if benefits are provided or appreciated by employees of employees or employees of shareholders.

Benefits include most of the benefits you provide to your employees, family or related persons*, excluding their salary. There are four categories of benefits in New Zealand: companies that provide benefits must file a return quarterly, annually depending on the tax year or annual depending on your income year. You must select the appropriate rates for the service and calculate the amount to be paid for each service. There are three different FBT rates that vary depending on whether or not you need to assign the benefit to a specific employee. The flat rate is 49.25% and applies to all benefits you provide to your employees. However, in some cases, it may be more beneficial for your business to use an alternative plan. When an employer lends money to an employee at a low interest rate or charges no interest at all, the difference between the interest actually charged and the interest calculated on the basis of the prescribed interest rate is considered incidental. The prescribed interest rate is revised quarterly and is available on the IRD website (www.ird.govt.nz). There are exceptions: There is an exemption of $300 per employee per quarter. However, it is important to note that if the allowance is exceeded, FBT is payable on the full value of the service; The exemption is not deducted first. The other limitation of this exception is that the combined benefits paid to all employees in a year cannot exceed $22,500.

Certain hospitality expenses may be subject to the Benefits Tax (FBT) if they are appreciated or received by employees. Motor vehicles available for personal use are classified as accessories in certain situations. You pay FBT at the cost of the employee service, for example: The cost of the car for the portion of the time it is available for personal use. Employee Benefits Tax (FBT) is a tax payable when the following benefits are provided to employees or employee-shareholders: If an employer makes a contribution to a fund or plan for the benefit of its employees, it may be subject to the FBT. If you offer your employees special benefits, such as gym memberships or work vehicles for personal use, you`re likely responsible for employee benefits tax (FBT). If an employer purchases insurance for an employee, but the employer benefits from the policy (e.g.key personal insurance), FBT is not payable. An ancillary benefit is acquired only if the insurance, fund or plan benefits the employee. FBT can be overwhelming, so you should seek professional advice if you`re not sure if your employees` benefits are taxable. If you don`t have to pay taxes, you may end up with a big unexpected bill. There are four main groups of taxable benefits: FBT is a tax on the benefits you provide to your employees.

This applies to things like: As of April 1, 2001, TFF is payable under one of two options. The single rate option (where TFF is paid at the highest rate for all employees) or the alternative rate option (formerly the multiple rate option, which involves assigning benefits to individual employees and merging non-attributable benefits with certain de minimis benefits). There is an “abbreviated form” of calculation under the alternative rate option, which simply combines unattributable benefits with minor benefits, but pays the highest TFF rate for the remaining benefits instead of allocating them to employees. The Benefits Tax (FBT) in the New Zealand tax system is the tax applied to most, but not all, social benefits (“benefits”), including those provided by a person other than an employer. The FBT is paid by the employer to the tax authorities and calculated on the basis of the taxable value of the benefit granted to the employee or partner. For more information on the application and calculation of ancillary tax, visit the IRD website. Some services are not subject to tax, but you will usually have to deduct another form of tax such as PAYE. This excludes cases where you reimburse your employee`s expenses. These exceptions are as follows: The FBT rules assign an income value to these benefits in kind, where the TFF payable is the tax calculated on that deemed income.

If the goods are delivered to employees primarily for business purposes (such as tools or a laptop), FBT`s personal use is exempt if the cost of each item was less than $5,000. If items costing more than $5,000 are made available for personal use (i.e. Staff can take them home), FBT must be charged on this service. If you supply motor vehicles to your employees, you can invoice FBT quarterly or annually. To determine the amount of FBT to be paid, you must use the formulas provided by Inland Revenue in the FBT Guide (IR409). The FBT value for each quarter is 5% of the cost price of the GST of the owner`s vehicle. If you apply annually, the value of the benefit is 20% of the owner`s GST cost. If you offer benefits to your employees in addition to their salary and salary, you will have to pay FBT to the tax authority. Determining whether you qualify can be complicated, so if in doubt, you should seek legal advice. You can register with FBT as part of your registration as an employer and must inform the tax office if your situation changes. You must file your tax return quarterly, annually or by income year. Your choice depends on your type of business, whether you were an employer in the previous year and how much tax you pay.

To calculate your tax liability, you must refer to the formulas provided by the IRD in its FBT guide (IR409). It is important to get it right and pay on time to avoid penalties and interest. You pay FBT on the cost of the employee service, for example: the cost of the car for the portion of the time it is available for personal use. See the formulas in the FBT Guide of the Tax Administration (external link). The full alternative rate is between 11.73% and 49.25% and applies only to attributable benefits. A separate calculation must be made for each employee. Rates are based on an employee`s benefit, including cash compensation (FBICR). The flat rate is 49.25% and applies to all benefits.

This is the highest FBT rate. The alternative simplified rate is 49.25% for all attributable and unallocated benefits for employees of major shareholders and 42.86% for unrestricted benefits. Employers pay a benefit tax (FBT) on benefits in kind received or received by employees, shareholders or others associated with the business. Benefits include things like work vehicles available for personal use, subsidies like health insurance or gym memberships, and discounts on goods or services. It does not apply to income already taxed such as salaries, wages and bonuses. 1. Determine if you want to perform an allocation calculation for the fourth quarter As mentioned in our previous article, effective April 1, 2021, the top tax rate was increased to 63.93% (in conjunction with the increase in the top tax rate to 39%) and the pooling rate to 49.25% (previously 42.86%). Prior to this change, many employers used the flat rate option to pay FBT a flat rate of 49.25% on all benefits. However, the increase in FBT rates prompted many employers to take advantage of the various alternative rate options available during the March quarter.