FBTnews - 2005
Issue 11 June 2005
In this issue:
- Welcome to FBTnews
- What is a fringe benefit?
- Exemptions for goods and services
- A reminder about penalties and interest...
- What to do if you can't pay
- Due date for filing and paying your first quarter return
- FBT prescribed interest rate for loans
Welcome to FBTnews
In this issue we look at what is a fringe benefit, exemptions for goods or services and what to do if you can't pay.
If you have an FBT topic you'd like to see in the newsletter you can write to the Editor, FBTnews, PO Box 2198, Wellington or email us at fbt.news@ird.govt.nz and we'll aim to cover the topic in a future edition.
What is a fringe benefit?
A fringe benefit is a non-cash benefit provided to an employee or an associate of an employee. Most benefits given to employees other than their salary or wages are fringe benefits.
For the purposes of FBT employees can include:
- past, present and future employees
- shareholder-employees
- people receiving withholding payments
- people receiving directors' fees
- associated persons (such as employee's husband, wife, child)
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 life or health insurance, superannuation schemes, and specified insurance policies.
Exemptions for goods or services
Did you know that you may qualify for an exemption from FBT if you are providing benefits to employees that are goods and/or services.
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 is not deducted first.
Example: Quarterly return
|
|
|
|
| Prize - airfare |
|
|
| Subsidised goods - clothing |
|
|
| Total for quarter |
|
|
| Exemption available |
|
|
There is no exemption for Kate, as the total value of benefits is over the $75 maximum. In this example the total exemption is $35.95.
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 a maximum exemption for all employees of $1,800 per year.
Example: Annual return
|
|
|
|
| Prize - airfare |
|
|
| Subsidised goods - clothing |
|
|
| Total for year |
|
|
| Exemption available |
|
|
In this case, the exemption can be claimed for both Gordon and Martyn, as the value of the benefits for each individual is less than the $300 maximum for the year.
If the period covered by the return is less or more than a normal income year, the following adjustments are needed:
exemption for an individual employee
Days covered by return x $300
365
exemption for all employees
Days covered by return x $1800
365
A reminder about penalties and interest..
If you pay your FBT late, an initial 1% late payment penalty will be charged on the day after the due date. A further 4% penalty will be charged if there is still an amount of unpaid tax (including penalties) at the end of the 7th day from the due date.
Every month the amount owing remains unpaid a further 1% incremental penalty will be added.
Interest is calculated daily on the amount outstanding, including penalties. The interest rate is currently 13.08%.
What to do if you can't pay
If you are unable to pay the full amount by the due date, please contact us as soon as possible. We will look at your current situation, your payment history and your ability to meet future tax obligations. This will help us to determine the best option for dealing with the amount due.
The first option to consider is whether you have the ability to pay in full. Your outstanding debt will incur daily interest as well as late payment penalties so there are advantages to you in raising money from other sources to pay the debt if you can.
If you are unable to pay in full, other options are:
- an instalment arrangement, where you repay the amount over time
- a write-off of the amount due if we determine that full payment would cause you serious hardship
- a combination of an instalment arrangement and a write-off of any amount that would cause you serious hardship if it was paid.
If an instalment arrangement is the best option we can negotiate this with you over the phone in most cases. The incremental penalties that normally accrue every month that the overdue tax remains unpaid are not charged if you contact us to negotiate an instalment arrangement. This suspension of incremental penalties remains right through until you've either repaid the amount by agreed instalments, or until any amount is written off, if we determine that full payment would cause you serious hardship. Daily interest however, continues to be charged.
Contacting us and entering into an arrangement before the due date for payment will further reduce any late payment penalties charged.
Due date for filing and paying your first quarter return
Your first quarter return and payment for the 2005 year is due on 20 July 2005.
FBT prescribed interest rate for loans
For the quarter beginning 1 April 2005 the prescribed rate of interest for calculating the fringe benefit value of low-interest loans to employees is 8.76%. This is an increase from the previous quarter's rate of 8.52%.
Download ›
PDF | 101kb | 2 pages
Download Acrobat Reader to view PDF files
Report an accessibility problem for this page
Date published: 09 Jun 2005
Back to top