Fringe benefit tax (FBT): Fringe benefit tax in relation to GST and income tax

Goods and services tax issues

Important - GST rate change affecting time of supply

You account for GST on the transaction at the time that the fringe benefit is or is deemed to be provided or granted. Example: Ad's are Us Ltd account for FBT on an annual basis and supply the unlimited use of a motor vehicle to two employees.They will need to apportion the value of the benefits with GST at 12.5% till 30 September 2010 and then at 15% from 1 October to 31 March 2011. Example: Ad's are Us Ltd supplies three staff with a travel benefit worth $2,100 each on 15 October 2010. The benefit would be accounted for in the FBT return which covers the October period. The GST rate that applies would be 15%.

Does the taxable value include GST?

Calculate fringe benefit tax on the GST-inclusive value of any fringe benefits. This requirement will not affect all fringe benefits.

Fringe benefits that are GST-exempt supplies will not include any GST component, so their taxable value is GST-exclusive. Examples are low-interest loans, overseas travel and life insurance.

How do you calculate the GST on fringe benefits?

To calculate the GST on fringe benefits, follow these steps.

1. Take the total taxable value of all fringe benefits from Box 3 of your FBT return.
2. Subtract the value of any benefits that are exempt or zero-rated for GST (for example, low-interest loans, overseas travel, life insurance). The result is the amount of fringe benefits liable for GST.
3. Multiply by 3 and divide by 23 and put this adjustment figure in:
   • Box 7 of the quarterly Fringe benefit tax quarterly return (IR420) for quarterly filers
   • Box 6 of the Fringe benefit tax annual return (IR422) and Fringe benefit tax income year return (IR421) for annual and income year filers.

Example

Details of taxable benefits for FBT quarter ended 31 December 2010:

Motor vehicles	$ 2,605
Low-interest loans	$ 425
Magazine and newspaper subscriptions	$ 52
Subsidy on employee's honeymoon trip to Fiji	$ 600
	______
	$ 3,682
The benefits liable for GST are:
Motor vehicles	$ 2,605
Magazine and newspaper subscriptions	$ 52
	______
	$ 2,657

The low interest loan and subsidy for the Fiji honeymoon are not included because loans and international travel are exempt and zero-rated supplies respectively.

The GST adjustment to include in Box 7 of the FBT return for the quarter ended 31 December 2010 is $346.56 ($2,657 multiplied by 3 then divided by 23). The adjustment amount is payable at the same time as the underlying FBT for the December quarter (i.e. 20 January 2011).

 

 

Date published: 29 Sep 2010

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