As an employer, there are 3 situations where you will need to pay fringe benefit tax (FBT) on goods and services:
- If you buy goods or services and provide these to employees for less than the GST-inclusive price you paid.
- If you sell goods you manufactured to employees at less than the lowest GST-inclusive price you sell identical goods to the public, either wholesale or retail.
- If you provide any goods or services to employees at less than the normal GST-inclusive price you sell to the public.
You may pay for an employee's home telephone, fax, internet connection, cell phone or pager. You will need to pay FBT on their private use if:
- the account is in your name
- you pay the whole account.
You may also pay some or all of an account that is in the employee's name. In this case the amount you pay is added to the employee's gross wages and PAYE is deducted.
If your business supplies transport to the public, such as passenger services by air, road, rail or sea, you need to pay FBT if an employee pays for less than 25% of the highest public fare. This also applies if the transport is provided by a company that is in the same group of companies as the employer and the group company is in the business of public transport.
Goods and services provided to shareholder-employees
If you provide goods or services to shareholder-employees these will generally be treated as fringe benefits.
You can choose to treat the goods or services as dividends. To do this you need to let us know in writing before the due date for the FBT return covering the period you provided the benefit in.
Exemptions for free, subsidised or discounted goods and services
You can provide up to $300 of free, subsidised or discounted goods and services per employee per quarter without having to pay FBT.
If you file annual returns the yearly exemption is $1,200 per employee.
As soon as this limit is exceeded, the full value of the benefit is subject to FBT. The exemption is not deducted first.
The maximum exemption you can claim is $22,500 per year. If the value of the benefits you provide exceeds this you must pay FBT on the full value of the benefits for the year. This needs to be paid in the current quarter.
Common items that are exempt from FBT include:
- distinctive work clothing that identifies your company
- car parks you lease or are on your premises
- frequent flyer and membership reward schemes unless you have an arrangement with the scheme’s provider that benefits employees.
The taxable value of free, subsidised or discounted goods and services
The taxable value of goods you purchase is the GST-inclusive price.
The taxable value of goods you manufacture is the normal GST-inclusive market price.
The taxable value of services you provide is the normal GST-inclusive market price, less any employee contribution you don’t reimburse.
The taxable value of subsidised transport you provide is the difference between 25% of the highest public fare and the amount the employee pays.