Issue 2 March 2003 (FBTnews)

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FBTnews - 2003

Issue 2 March 2003

In this issue:

Welcome to FBT news
Fourth quarter or annual returns
What is the difference between annual and income year returns?
Return filing options
FBT prescribed interest rate for loans

Welcome to FBTnews

We'd like to thank everyone who provided feedback on our first edition of FBTnews. We welcome requests for FBT topics you'd like to see in the newsletter and we'll aim to cover these in future editions. You can write to:

The Editor,
FBTnews,
PO Box 2198,
Wellington

or email us at fbt.news@ird.govt.nz

If you didn't receive our first edition of FBTnews in December you can view it on our website.

FBTnews will be published quarterly. Those of you who are not quarterly filers can view each edition on our website or, if you or someone you know would like to receive FBTnews electronically, you can subscribe to it at our website.

Just enter your email address in the box provided and click the "OK" button.

If you have an email address but no internet access, email us on fbt.news@ird.govt.nz and we will subscribe for you.

Fourth quarter or annual returns

Due date for filing and paying your fourth quarter or annual return

31 May 2003 is the standard due date for both the fourth quarter and annual returns. As 31 May falls on a Saturday this year and Monday 2 June is a public holiday, you can make your payment on Tuesday 3 June without incurring a penalty.

We've been asked the following questions about completing fourth quarter or annual returns.

Should I be using the multi-rate calculations?

If you have used the 49% rate to calculate your FBT payable in any of the quarters 1 to 3, you must use the full or short-form multi-rate calculation when completing your fourth quarter return. Those of you who file annual returns or have used the 64% rate to calculate FBT in quarters 1 to 3, can either use 64% or the full or short-form multi-rate calculation. The 2003
Fringe benefit tax return guide (IR425) you received with your return will help you decide which option is for you.

Online multi-rate calculator

If you have access to our website you can use our FBT multi-rate calculator to work out the FBT payable on fringe benefits provided. Go to our FBT webpage, enter the employee's cash remuneration and attributed fringe benefit details and the calculator will work out the FBT payable.

What are attributed benefits?

Generally, attributed benefits are those supplied to a specific employee or where the annual taxable value is greater than $1,000.

Example

DSC Ltd provides their salesperson Judy with a car. As the benefit provided is the use of a motor vehicle, the benefit must be attributed to Judy.

There are some exceptions to this rule so please check the 2003
Fringe benefit tax return guide (IR425) if this situation applies to you.

When do I have to attribute benefits?

If you use the multi-rate calculations you must attribute fringe benefits as follows:

Full multi-rate calculation
You are required to attribute fringe benefits to the employee receiving them. FBT will then be calculated according to the employee's total remuneration package.
Short-form multi-rate calculation
All attributed benefits received by any employees are combined and FBT is calculated on the total value of attributed benefits at 63.93%.

What are non-attributed benefits?

Non-attributed benefits are generally shared benefits that no one employee has the principal use of, or where the annual taxable value is below $1,000.

Example

The vehicles on the car yard of TAS Motor Vehicles Ltd are available to the sales team.

There are some variations to the $1,000 thresholds so please check the 2003
Fringe benefit tax return guide (IR425) before you complete your return.

What rate do I use for non-attributed benefits?

Non-attributed benefits provided to ordinary employees are taxed at a flat rate of 49%. Non-attributed benefits provided to major shareholder-employees are taxed at 64%.

What is the difference between annual and income year returns?

Annual returns cover the period 1 April to 31 March, and the return and payment is due on 31 May. Annual returns can be used by all employers (including companies) provided their annual gross tax deductions (PAYE) and specified superannuation contribution withholding tax (SSCWT) deductions payable were $100,000 or less in the previous year.
Income year returns are for companies only. This return can be used where shareholder-employees receive benefits, it should not be used for benefits received by ordinary employees. The income year covers the accounting year of the company and the due date for the income year FBT return is the same as the company's end-of-year tax due date. This allows for adjustments that may be necessary as part of preparing the company's annual income tax accounts. To qualify to file income year returns, the company's annual gross tax deductions (PAYE) and SSCWT deductions payable must have been $100,000 or less in the previous year.

Return filing options

Quarterly returns are automatically allocated when you register as an employer unless you make an election to use a different filing option. This option can be used by all employers for fringe benefits provided to both ordinary employees and shareholder-employees.

The following return filing options are only available if your annual gross tax deductions (PAYE) and SSCWT deductions were $100,000 or less in the previous year. If they were over $100,000 you must file quarterly returns.

Annual returns can be elected by employers where fringe benefits are provided to ordinary employees only. An election to file annual FBT returns is required in writing. You can do this by completing our Fringe benefit tax election (IR414) form, which you can get from our website or by phoning INFOexpress on 0800 257 773.
Income year returns are for use by companies only. An election to file only an income year return for shareholder-employees is one of the options available. Where the company also provides fringe benefits to ordinary employees, a combination of income year and annual or quarterly returns is also available. Our
Fringe benefit tax election (IR414) form outlines the various options that can be elected. You can get the Fringe benefit tax election (IR414) form from our website or by phoning INFOexpress on 0800 257 773.

When should I make an election to change from quarterly to yearly returns?

There are set dates by which you must make an election to file yearly returns. These depend on the type of return you want to file.

It is important that you make your election by the due date as we cannot accept late elections. If your election is late, you will have to continue filing quarterly returns until the following financial or income year.

Due date to make election to file annual returns

You must make your election by 30 June in the year for which the election first applies. For example, if you want to file your first annual return for the year ended 31 March 2004, you must make an election by 30 June 2003.

Due date to make election to file income year returns

Companies with shareholder-employees can elect to file income year returns by the last day of the first FBT quarter in the income year for which the election applies. For example, a company with a 30 June balance date would have to elect by 30 September 2003 to file a return for the year ended 30 June 2004.

Due date to make election to file both annual and income year returns

Companies that choose this option need to make their election by the later of:

the last day of the first quarter of the annual year, or
the last day of the first quarter of the income year to which the election applies.

For example, a company with a 30 June balance date would have to elect by 30 September 2003 to file annual and income year returns for the periods ending 31 March 2004 and 30 June 2004 respectively.

Note

The due dates for making any election for new employers and companies differ, so please refer to the Fringe Benefit Tax Guide (IR409) if this situation applies to you.

FBT prescribed interest rate for loans

There's no change to the prescribed rate of interest for calculating the fringe benefit value of low-interest loans to employees. It remains at 7.83% for the quarter beginning 1 January 2003.

We hope you have found this edition of FBT news informative and helpful. We welcome your feedback.

Bryre Patchell
National Manager, BusinessDirect