Fringe benefit tax (FBT): Fringe benefit tax in relation to GST and income tax
Income tax issues
Some employee payments and provisions, related to entertainment and remuneration, are not subject to fringe benefit tax.
Entertainment
If employees can only enjoy entertainment at a set time, or as part of their employment duties, the cost is not subject to FBT but comes under the rules for entertainment expenses. The following are specified types of entertainment for income tax purposes when an employer provides them to employees:
- corporate boxes and similar exclusive areas at sporting and recreational events
- holiday accommodation
- pleasure craft
- food and beverages.
Such items will come within the provisions of fringe benefits if:
- the employees can choose when to enjoy the benefit, or they enjoy or consume the benefit outside New Zealand, and
- the employees do not consume or enjoy the benefit in the course of or as a necessary consequence of employment.
Specifically exempted is the "on premises" exemption that has been extended to include premises of another company in the same group when there is 66% or greater common ownership with the employer company.
Remuneration
Remuneration includes normal salaries and wages and items such as travel allowances, free board and lodgings and non-taxable allowances.
Note: An income tax deduction is available for fringe benefit tax.
Example
A business provides drinks for employees for the weekly staff get-together. This benefit is not subject to fringe benefit tax, as the employees can only enjoy the drinks at a set time, arranged by the employer. The cost of the drinks is 50% deductible for income tax.
Date published: 14 Oct 2004
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