FBTnews - 2002
Issue 1 December 2002
In this issue:
- Welcome to our first edition of FBTnews
- So what are fringe benefits?
- Are you filing nil FBT returns?
- GST on fringe benefits
- Why is there GST on fringe benefits?
- Did you know?
- You can receive FBTnews electronically
- FBT prescribed interest rate for loans
- Where to send FBT returns
Welcome to our first edition of FBTnews
Up till now we've included information about fringe benefit tax (FBT) in Payroll News. However,
Payroll News isn't always seen by the person who deals with FBT, so we've decided to trial this newsletter for the person who deals with FBT in your business. We'll cover tax changes, due date reminders, returns completion, handy hints and topical issues relating to FBT. We plan to make this a quarterly newsletter and will include a copy with your FBT returns. Copies of each edition will be available on our website. If you are an annual or income year filer this will allow you to view other editions issued during the year. You can also subscribe to FBTnews electronically.
We'd like your views on whether this newsletter will be useful to you, along with any FBT topics you'd like us to cover in future editions. You can write to:
The Editor,
FBTnews,
PO Box 2198,
Wellington
or email us at fbt.news@ird.govt.nz
We look forward to hearing from you.
So what are fringe benefits?
Most benefits given to employees other than their salary or wages are fringe benefits.
The four main groups of taxable fringe benefits are:
- motor vehicles available for private use
- free, subsidised or discounted goods and services
- low-interest loans
- employer contributions to sick, accident or death benefit funds, superannuation schemes, and specified insurance policies.
If these benefits are enjoyed or received by employees as a result of their employment, the benefits are liable for FBT.
For more information, read our Fringe benefit tax guide (IR409). You can get this from our website at www.ird.govt.nz or by phoning INFOexpress on 0800 257 773.
Are you filing nil FBT returns?
Did you know that if you are not providing fringe benefits, you may be eligible for an exemption from filing FBT returns? All you need to do is to let us know in writing. You can do this by completing our Fringe benefit tax election (IR414) form, which you can get from our website www.ird.govt.nz or by phoning INFOexpress on 0800 257 773. Once we have processed your election form we will write to you telling you the date the change becomes effective. In the meantime, you will still need to file any FBT returns we have already sent you.
GST on fringe benefits
Further to our Payroll News articles in June and July we've noticed that some employers are still calculating the GST on fringe benefits adjustment incorrectly. Common mistakes include calculating the GST on the incorrect box on the FBT return, or using the value from the correct box to calculate--but multiplying it by 12.5% instead of dividing the value by 9. If you have made GST adjustments on your FBT returns, please double check that you have calculated the GST correctly. This is explained below.
Calculating the GST adjustment
- Take the total taxable value of all benefits from Box 3 on your FBT return. Taxable value shown in Box 3 should be GST-inclusive value.)
- Subtract the value of any benefits which are exempt supplies for GST eg low-interest loans, other financial services, contributions to employee superannuation and life insurance policies, or zero-rated supplies eg international travel.
- Divide the resulting total by 9. This is the GST adjustment.
If your calculation was incorrect
If, after checking your GST adjustment calculation, you find an error, simply ring us on 0800 377 772 and tell us the correct amount.
In most cases, we can amend the return while you are on the phone and tell you if you have a new amount payable or are due a refund. We'll set a new due date for any extra tax payable and you won't get late payment penalties if you pay by the new due date.
Why is there GST on fringe benefits?
If you are registered for both GST and FBT, you'll have both GST and FBT to pay on most benefits supplied to employees. For example, a company provides an employee with a motor vehicle which is available for both business and private use. The purchase price and the running costs of the motor vehicle include GST, which the company would claim in its GST returns. The availability of the motor vehicle for the employees' private use is subject to FBT and is also considered to be a supply for GST purposes.
Note
When you're calculating the value of a benefit provided for FBT purposes, use the GST-inclusive cost.
Did you know?
If you are providing benefits to employees which are goods and/or services and those goods and/or services are under a certain value, you may qualify for an exemption from FBT.
General exemption
There is a $75 exemption per employee per quarter for fringe benefits that are goods and/or services. However, if the value of the benefits for an employee goes over $75 for a quarter, the full value of the benefits is subject to FBT - the exemption does not apply.
Example: Quarterly return
| Employees | R Green | D Kupa |
|---|---|---|
| Prize - airfare | $250.00 | |
| Subsidised good - clothing | $35.95 | $35.95 |
| Total for quarter | $35.95 | $285.95 |
| Exemption available | $35.95 | Nil |
There is no exemption for D Kupa, as the total value of benefits is over the $75 maximum.
Maximum exemption - quarterly filers
The maximum exemption an employer can claim is $450 per quarter. If the total value of benefits for all employees goes over $450 for a quarter, the employer must pay FBT on the total value of the goods and/or services.
Maximum exemption - annual or income year filers
Employers who file annual or income year returns have a yearly exemption of $300 for each employee, with the maximum exemption for all employees of $1,800 per year.
If all fringe benefits you provide are covered by exemptions you can elect the "not liable for FBT" option on the Fringe benefit tax election (IR414) form and we will stop sending you returns. If, however, this exemption only applies in a particular quarter and/or you have received a return, you will need to complete a nil FBT return.
You can receive FBTnews electronically
If you or someone you know would like to receive FBTnews electronically you can subscribe to it at our website. Simply give us your email address in the box provided and click the "OK" button.
If you have an email address but do not have internet access, email us on fbt.news@ird.govt.nz and we will subscribe for you.
We'll still continue to send you the printed version of FBTnews.
FBT prescribed interest rate for loans
For the quarter beginning 1 October 2002 the prescribed rate of interest for calculating the fringe benefit value of low-interest loans to employees is 7.83%. This is an increase from the previous quarter's rate of 7.50%.
Where to send FBT returns
When we post out returns we include a pre-addressed envelope with the return for your convenience. If it's gone missing or you didn't get one, send your return to us at one of the following postal addresses.
If you live in:
Northland or the South Island, send it to
Inland Revenue
Southern Processing Centre
PO Box 3752
Christchurch
Auckland, send it to
Inland Revenue
Northern Processing Centre
PO Box 1454
Hamilton
Other North Island areas, send it to
Inland Revenue
Central Processing Centre
PO Box 39090
Wellington Mail Centre
If you're sending us any items other than returns, please see our postal address listings in the Blue Pages of your local telephone book.
Well, that's our first edition of FBTnews. We hope you've enjoyed reading it and found it useful.
Remember, we welcome your feedback.
Bryre Patchell
National Manager, BusinessDirect
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Date published: 23 Nov 2004
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