Issue 10 March 2005 (FBTnews)

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FBTnews - 2005

Issue 10 March 2005

In this issue:

Welcome to FBTnews
Fourth quarter or annual returns
Deductibility of expenditure and FBT implications for travel by motor vehicle between home and work
FBT prescribed interest rate
GST on fringe benefits

Welcome to FBTnews

In this issue we look at filing end-of-year and final FBT returns and the FBT implications of motor vehicle travel between home and work.

Fourth quarter or annual returns

Due date for filing and paying your fourth quarter or annual return
31 May 2005 is the due date for filing and paying both the fourth quarter and annual returns.

Completing FBT returns for quarter 4
The fourth quarter FBT return is completed in the same way as the previous three quarters, but instead of completing section B, you complete section C.

There are three options available:

Pay FBT at 64% if you have chosen 64% in each of the three previous quarters.
If you paid FBT at 64% in the previous three quarters, you may still choose to complete the multi-rate calculations in the fourth quarter.
If you paid FBT at 49% in any of the previous three quarters, you must complete the multi-rate calculations in the fourth quarter using either the "full" or "short-form" calculation.

Annual returns
Employers completing annual returns may choose one of the following options:

Pay FBT at 64% of the taxable value of the benefits provided.
Complete their FBT return using the multi-rate calculation.

Filing the wrong FBT return
Often, the Fringe benefit tax annual return (IR422) is printed from our website and used by companies with shareholder-employees when they should be filing a Fringe benefit tax income year return (IR421).

Filing the wrong return may delay processing and result in unnecessary return policing letters being sent to you. If you are uncertain which return to file please contact us.

What is the difference between annual and income year returns?

Fringe benefit tax annual return (IR422)
This is the return for employers (including companies) who have elected to file annual returns. The period covered by this return is from 1 April to 31 March. It is due on 31 May of the same year.

Fringe benefit tax income year return (IR421)
This return is for companies with shareholder-employees. It covers the same period as the company's accounting year. The due date for filing the return and payment is the same as that for paying end-of-year income tax. This will generally be 7 April, where the company's income tax return is filed by an agent under an extension of time.

If the company has an early balance date, you may not receive a return before the due date. If you don't receive a return you can complete one online, or get one from our website www.ird.govt.nz or you can request one by phoning INFOexpress on 0800 257 773.

Election to file returns yearly
You can only file yearly returns if your gross annual tax deductions (not including earners' levy) and SSCWT deductions are $100,000 or less. You can elect to file yearly returns by completing the online FBT election form or by completing the Fringe benefit tax election (IR414) form and sending it to us.

Completion of final FBT return where you have ceased to employ staff and provide fringe benefits
If this is your final FBT return, you have ceased employing staff and do not intend to employ any more staff in the same income year, you should complete sections A, C and D in the quarter you cease to employ (quarterly filers only). Please write "final return" next to the circles at the top of the IR420 return. There is no need to indicate that the return is for quarter 4.

Note: If you are still providing fringe benefits to former employees you must continue to pay FBT on these benefits.

Options for completing your final return
You are required to elect the multi-rate option in Box 5 of your final FBT return. You can complete your final return using either the "full" multi-rate calculation process, or the "short-form" multi-rate calculation process.

Note: Where the multi-rate option is elected outside the fourth quarter, we may contact you to confirm this is your final FBT return.

Due dates for final return
If you are filing your final FBT return in quarters 1, 2 or 3 the due date shown on the return will be the 20th of the month following the end of the quarter. The actual due date for filing a final return in quarter 1, 2 or 3 is extended to the end of two months immediately following the end of the quarter in which employment stopped. See table below:

Return period	Return and payment due date	Due date if permanently ceasing employing staff
1 April to 30 June	20 July	31 August
1 July to 30 September	20 October	30 November
1 October to 31 December	20 January	28 February
1 January to 31 March	31 May	31 May

If you are still employing staff but have ceased providing fringe benefits
If you have ceased providing fringe benefits part-way through the year, you are required to continue filing FBT returns until the end of that tax year. Send the Fringe benefit tax election (IR 414) form in with your fourth quarter return.

If you permanently cease employing staff
If you have permanently ceased paying wages, phone us on 0800 377 772 to let us know, even if your business is still going.

Deductibility of expenditure and FBT implications for travel by motor vehicle between home and work

In October last year, Inland Revenue published an interpretation statement IS3448: Travel by motor vehicle between home and work-deductibility of expenditure and FBT implications.

The statement discusses:

when expenditure on travel between home and work will be deductible for income tax purposes
the meaning of "business purposes" and "business use" in the Income Tax Act sections dealing with record-keeping requirements (sections DH 1 to DH 4), and
when travel between home and work will be treated as work-related use rather than "private use or enjoyment" for FBT purposes.

"Private use or enjoyment"
A benefit consisting of the private use or enjoyment (or the availability for private use) of a motor vehicle owned, leased, or rented by an employer who makes it available to an employee is a fringe benefit on which FBT is payable.

"Private use or enjoyment" means travel that confers a benefit of a private or domestic nature. The definition of "private use or enjoyment" specifically includes travel to or from home and any other travel that confers a benefit of a private or domestic nature.

The question is whether there is a private benefit. There is a distinction between private use and work-related use. The provision of a vehicle for work-related use only does not constitute a benefit of a private nature.

For FBT purposes, travel between home and work will be private use unless:

the need for the work to be performed partly at home (and, therefore, the need for the travel) arises from the nature of the work, and
the travel is "on work".

The fact that work is performed at home (whether or not under a contractual obligation) is not sufficient. Travel between home and work would be private travel if the work done at home is because of the personal circumstances or personal preferences of the taxpayer.

The fact that a vehicle is taken to an employee's home for security reasons does not in itself mean that travel between home and work is work-related travel.

The interpretation statement was published in Tax Information Bulletin Vol 16, No 10 (November 2004). The TIB is available on our website under Newsletters and bulletins or you can ask for a copy of the statement to be emailed to you from rulings@ird.govt.nz

FBT prescribed interest rate

For the quarter beginning 1 January 2005 the prescribed rate of interest for calculating the fringe benefit value of low-interest loans to employees is 8.52%. This is an increase from the previous quarter's rate of 8.02%.

GST on fringe benefits

If you are registered for both GST and FBT you may have to make an adjustment for GST in your FBT returns for fringe benefits you have provided.

Example
If an employee has private use of a company car during the FBT quarter ending 31 March 2005, you have to show the GST on that fringe benefit in Box 7 of the Fringe benefit tax quarterly return (IR 420) for that period. This GST adjustment is payable with your FBT for that period.

To calculate the GST amount, the figure in Box 3 of the FBT return (less any fringe benefits that are zero-rated or exempt for GST) is divided by 9 and this is the GST amount to be included in Box 7.
No claims can be made in your GST return as you will already have claimed the GST content of the company car at the time of purchase. Remember the GST you have paid in your FBT return is for private use.