Issue 8 September 2004 (FBTnews)

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FBTnews - 2004

Issue 8 September 2004

Correction
Filing your FBT returns online - saving you time
How to file using eFBT
Making electronic payments
FBT consequences of benefits provided by third parties
FBT prescribed interest rate for loans

Welcome to FBTnews

In this issue we look at online filing and electronic payments. We also look at the consequences of third parties providing benefits.

Correction

In the June edition of FBTnews we included a number of common mistakes made when calculating FBT. Under the sub-heading "FBT and free, subsidised or discounted goods and services" we stated that Christmas parties (not held on work premises) for employees were subject to FBT. This is incorrect, Christmas parties provided to employees and/or clients are subject to the entertainment rules rather than FBT. We apologise for the inconvenience caused.

Filing your FBT returns online - saving you time

If you are filing your FBT returns online through the internet please don't send us the paper version as well. Even if you are paying fringe benefit tax owing on an FBT return you have filed through the internet at a Westpac branch, you don't need to send us the paper version. Simply tear off the payment slip at the bottom of the return and include that with your payment.

If you have not used the FBT online return service before, why not give it a go and get the following benefits:

the eFBT return arrives at Inland Revenue the same day you send it
you get immediate confirmation that Inland Revenue has received the return.

How to file using eFBT

Go to our website and follow the "Get it done online" link. Then look up the service under FBT. Keep the paper return we sent you handy because you'll need to key in the unique 14-digit number printed at the top of the return.

When filing electronically, remember to print the confirmation page of the return, sign it and keep it as a record in your file.

Making electronic payments

Most banks offer an online tax payment service on their website which ensures that sufficient payment reference details are included with your payment. If your bank does not offer this service you can pay using their standard online service but you need to ensure we have all the information.

Please make sure you supply the following details for us to credit your payment to your account:

In the particulars panel, enter the IRD number of the person or organisation the payment is for.
In the payee code panel, enter three zeros in the first three boxes, leave the next box blank, enter TAX and leave another box blank. Then enter the code for the correct tax type.
In the reference panel, enter the period end date the payment is for, not the date you are making the payment.

The period end date must show the day, month and all four digits of the year. Your FBT period end date is printed on your FBT return in Box 2.

If the correct details are not provided, processing these payments will be delayed, which could result in:

payments updating to an incorrect account
incorrect statements and letters being issued, and
incorrect penalties or interest being charged.

Electronic payments to Inland Revenue should be made to bank account number
03 0049 0001100 27.

Example

For more information, read our booklet Making payments (IR584). You can get this from our website or order a copy by phoning INFOexpress on 0800 257 773.

Note

Payments must be made before the end of online banking business hours if they are to be received that same day. Please contact your bank if you are unsure of your bank's online payment hours.

FBT consequences of benefits provided by third parties

On 20 May 2004, Inland Revenue issued a public ruling (BR Pub 04/05: Provision of benefits by third parties: FBT consequences). The ruling applies from 20 May 2004 to 19 May 2007.

The ruling deals with benefits received by employees from third parties where:

there is an arrangement between the employer and the third party, and
the benefits would be subject to FBT if the employer had provided them

Example 1

Lavart Travel (a travel agency) employs a number of staff, and enters into a scheme with Enilria Air (an airline) to strengthen their relationship. The scheme involves Enilria Air agreeing to give a certain number of free domestic flights per year to employees of Lavart Travel who excel in promoting and selling Enilria Air flights. In return, Lavart Travel agrees to have their employees promote Enilria Air flights, and convert flights to Enilria Air wherever possible. To determine which employees are entitled to free flights, Lavart Travel awards its staff points for outstanding customer service. Once a staff member has accumulated the required number of points, they are entitled to a free flight from Enilria Air. There is no cost to Lavart Travel for those flights.

There is an "arrangement" between the parties, as there is a consensus between Lavart Travel and Enilria Air that involves the provision of a benefit to employees. One of the main purposes of Lavart Travel in entering into the arrangement is to provide the staff with free flights. Although Lavart Travel have another significant purpose in entering into the arrangement, which is to strengthen their relationship, the reason for providing a benefit to employees is not incidental to that purpose. In this case, FBT will be payable by Lavart Travel on the value of the flights.

Example 2

Srac Limited wants to purchase a number of motor vehicles for use in their business. The company approaches a motor vehicle dealer and negotiates a discount on the vehicles it purchases. Srac tells the dealer that it has a substantial number of employees who would like to purchase vehicles, and who it expects would be induced to buy them from the dealer if they were offered the same discount. The dealer agrees that it will offer the employees the same discount if they wish to buy vehicles from them.

Here, the employer has requested that the dealer provide their employees with a discount on any vehicles purchased. There is an arrangement between the third party and the employer that is for the provision of a benefit.

Although the dominant purpose of the employer may be to get a benefit for themselves, the purpose of the employer in asking the dealer to offer the same discount to their employees could not be said to flow from this purpose. In this case, as a more than incidental purpose of the employer in entering into the arrangement is to provide a benefit, FBT will be payable by Srac Limited on the value of the discount given.

This ruling was published in Tax Information Bulletin Vol 16, No 5 (June 2004) you can find this in the Newsletters and Bulletins section of our website. You can get the TIB from our website or you can ask for a copy of the ruling to be emailed to you from rulings@ird.govt.nz.

FBT prescribed interest rate for loans

For the quarter beginning 1 July 2004, the prescribed rate of interest for calculating the fringe benefit value of low-interest loans to employees is 7.5%. This is an increase from the previous quarter's rate of 7.3%.