Issue 4 September 2003 (FBTnews)

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FBTnews - 2003

Issue 4 September 2003

In this issue:

Welcome to FBT news
Questions we've been asked
Online services
FBT prescribed interest rate for loans
Our business hours for phone enquiries

Welcome to FBTnews

Thanks to those of you who have requested articles on various FBT topics.

If you have any FBT topics you'd like to see covered 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 would like to receive FBTnews electronically you can subscribe to it.

If you don't have internet access, but you have an email address, email us at fbt.news@ird.govt.nz and we will subscribe for you.

Questions we've been asked

FBT and personal development

If an employer pays for an employee to do a personal development course as opposed to a specifically work-related course, is this subject to FBT?

Generally, where the course has more to do with the employee's personal development than with acquiring a skill to be used in their job, the expenses paid by the employer would be subject to FBT. However, where there is a reasonable link between the skill to be acquired, and the employee's role in employment, the payment for the course would not be subject to FBT.

The first thing you need to consider when determining if there is an FBT liability is to assess whether or not there is a reasonable link to the employee's work. If there is, it is unlikely the cost of the course would be subject to FBT, even though there could also be a strong personal development element included.

Example 1

Adam works for ABC Ltd. Part of his job is to make presentations to clients. ABC has agreed to pay Adam's expenses for toastmasters so he can develop his public speaking skills. In this situation there is a reasonable link to Adam's work, therefore no FBT liability would arise.

Example 2

Gretchen works as a panel-beater. She is going on holiday to Japan and has decided to learn Japanese. Her employer has agreed to pay for her foreign language course. There is no reasonable link between the language course and the work Gretchen does, therefore the cost of the course would be subject to FBT.

Clothing supplied to employees

Clothing an employer provides will be exempt from FBT if it is distinctive work clothing. Any single item of clothing will be distinctive work clothing if it forms part of a uniform which is identifiable with the employer because of logos, pattern, colour scheme or style. It would have to be worn by the employees in their employment and would not normally be worn privately.

Note: Safety and protective clothing is exempt from FBT.

Carparks

Employees' carparks are normally subject to FBT if the employer pays for the car parking. However, if the employer provides car parking on their own or permanently leased premises, there is no FBT liability.

Entertainment

Entertainment benefits that employees consume or enjoy when they choose and which are outside their employment duties, are subject to FBT. If employees can only enjoy entertainment at a set time, or as part of their employment duties, the cost is not subject to FBT.

Example 1

XYZ Ltd has had a record sales month. All their employees are given $100 dinner vouchers to thank them for the hard work they have done. As the employees can elect when they want to dine the entertainment benefit they have received would be subject to FBT.

Example 2

As part of Christmas celebrations and to thank their clients, XYZ Ltd holds a Christmas BBQ for clients and staff. As the BBQ is held at XYZ premises and can only be enjoyed at a set time there is no FBT liability.

Box 7 of your quarterly return

We have been asked if the GST paid as part of your FBT return (in Box 7) can be claimed as an expense in your GST return. The short answer is no. It cannot be claimed in your GST return because it is an amount of GST that you owe to Inland Revenue.

If you provide fringe benefits to an employee, as well as an FBT liability arising, this is also treated as the supply of goods and services and is therefore subject to GST. This amount of GST is what you return in Box 7 of your FBT return.

Example

A company purchases a new motor vehicle for business use. At the time of the purchase, the GST on the full purchase price is claimed in the company's GST return. If the vehicle is then available to an employee for private use, an FBT liability arises. In addition, a GST adjustment must be made in respect of the taxable supply to the employee effectively to repay the portion of GST that has been previously claimed. This adjustment is made in Box 7 of the FBT return.

We collect this amount of GST in your FBT return because it is easier for you to calculate it when you prepare your FBT return.

Online services

In the June edition of FBTnews we told you how you could file your FBT returns online.

Other online services you may find useful include the tax due date calculator and the online correspondence service. You'll find both these services under the online services menu.

The tax due date calculator is designed to customise your tax due dates based on the information you enter.

The online correspondence service is a secure internet-based service that lets you send Inland Revenue questions about your tax account and receive our responses securely and confidentially.

To use the online correspondence service you will need to register with us.

Go to Register for password under the online services menu.

You will need your IRD number to register yourself, or your employer's or tax agency number if you're registering for work purposes.

FBT prescribed interest rate for loans

For the quarter beginning 1 July 2003 the prescribed rate of interest for calculating the fringe benefit value of low-interest loans to employees is 7.33%. This is a decrease from the previous quarter's rate of 7.74%.

Our business hours for phone enquiries

Just a reminder that you can call us toll-free during our business hours which are 8 am - 8 pm weekdays and 9 am - 1 pm on Saturdays.

Business customers can contact specialist staff directly on these numbers:

Employers (includes FBT filers)	0800 377 772
GST	0800 377 776
General business tax enquiries	0800 377 774
Overdue returns	0800 377 771
Payment options for overdue tax	0800 377 771

Please note that our busiest time is between 9 am and midday and Monday is the most popular day for enquiries.

Free calling does not apply to cellular calls.

We randomly record calls made to Inland Revenue to monitor and improve the quality of our customer service. Please note that we store these recordings securely for a limited time and destroy them after use.

Kathleen Clement
Manager
Delivery, Planning and Initiation