FBTnews - 2007

Issue 19 June 2007

In this issue:

• Free, subsidised or discounted goods and services - exemptions
• Motor vehicle valuation methods
• Did you stop providing fringe benefits at 31 March 2007?
• Providing low-interest loans
• FBT prescribed rate on low-interest loans
• Due date for your return

Free, subsidised or discounted goods and services - exemptions

From 1 April last year, the general exemption for goods and services provided to employees increased to $200 per employee, per quarter, up to an employer maximum of $15,000 per annum.

$200 employee exemption

You can provide free, subsidised or discounted goods and services to employees up to a maximum of $200 per employee, per quarter. If the value of the benefits for an employee is over $200 a quarter, then the total value of the benefit is subject to FBT - the exemption isn't deducted first.

$15,000 employer exemption

The $15,000 employer maximum is based on the current quarter and the previous three quarters. When calculating the employer exemption in a quarter, remember to deduct the previous three quarters from the $15,000 maximum. This will give you the amount of free, subsidised or discounted goods and services you can provide in the current quarter without having to pay FBT.

Example

In the June 2007 quarter Extreme Dirt Design provided the following free goods:

Because Jessica has received free goods to the value of $400 (which is in excess of the $200 employee maximum), Extreme Dirt Design will need to pay FBT on the $400 weekend holiday package regardless of whether the total free, subsidised or discounted goods and services for this quarter and the previous three quarters is $15,000 or more.

Motor vehicle valuation methods

Tax book or actual cost price

For vehicles purchased or leased after 1 April 2006 you can use either the tax book value or actual cost price valuation method to calculate the FBT on motor vehicles that are available for private use. 
Once you have chosen the best valuation method for your business you must continue to use your chosen option until either:

• the vehicle is sold
• the vehicle ceases to be leased, or
• a period of five years has elapsed.

What's the best valuation method for my business?

If you intend to keep or lease your business vehicle for five or more years then the tax book value will result in your business paying less FBT in total, although you will pay significantly more in the first few years. If you use the tax book valuation method the minimum value your motor vehicles can depreciate to is $8,333.

If you choose to use the actual cost price valuation method please remember to include GST and any initial costs of getting the vehicle on the road (not including car registration) and any accessories you have fitted to the vehicle such as a tow-bar, canopy or signwriting.

Did you stop providing fringe benefits at 31 March 2007?

If you've continued to employ staff but haven't provided fringe benefits in this quarter and don't intend to provide your employees with fringe benefits in the future, you can either:

• write on this return that you stopped providing fringe benefits at 31 March 2007
• complete the "not liable" section on the fringe benefit tax election under Get it done online >
• call us on 0800 377 772 and let us know that you no longer provide fringe benefits

and we will stop sending you FBT returns.

Providing low-interest loans

If you provide low-interest loans to your employees (including salary advances) you'll need to pay FBT on the difference between the interest rate you charge and the prescribed interest rate we set (unless you're a bank or other financial institution, you can use the market rate of interest).

To work out the amount of FBT payable you'll need to calculate the interest charged and the prescribed rate of interest on a daily basis.

To work out the interest use the following calculation:

Matthew's Flowers provided an employee with a loan at a 2% interest rate. The loan agreement is that interest will compound daily and the employee is required to make repayments of $100 on the last working day of each month. At the beginning of the June quarter the employee's loan balance was $5,000. During the June quarter the employee made $100 repayments on 30 April, 31 May and 29 June.

The difference between the 2% interest rate and the prescribed interest rate is $92.40. FBT is payable on this amount.

FBT prescribed rate on low-interest 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 9.55% for the quarter beginning 1 April 2007.

Due date for your return

Your Fringe benefit tax quarterly return (IR420) for the period 1 April 2007 to 30 June 2007 is due on 20 July 2007.

Alison Parks
Manager
Customer Operations

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Other issues this year

Issue 21 December 2007
Issue 20 September 2007
Issue 18 March 2007

Date published: 11 Jun 2007

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