Many businesses need to assess the non-cash benefits they provide to employees to determine whether Fringe Benefit Tax needs to be accounted for. Here’s a quick guide to FBT to help you avoid making mistakes that could affect your profitability!

Don’t apply the maximum FBT rate across the board

You may think attribution rules are too complex and any savings from multi-rate calculations are insignificant or compliance costs of applying attribution rules are too high. This is a misconception. Go through the attribution exercise and see how much net savings you can have.

GST on FBT

All fringe benefits must be calculated on a GST inclusive basis and it’s important to ensure that the cost base for each is correct. Note that a company can’t claim GST on FBT in the company GST return but can do so as a tax deduction.

The GST on FBT adjustment involves calculating GST on the gross taxable benefit that’s subject to GST and including it as an FBT payable. However, this GST amount is often mistaken as claimable in the GST return. An employee benefit is taxable for GST purposes, similar to a sale, so the GST adjustment in the FBT return is the “supply” paid to IRD.

Another way to put it is when the employer acquired the benefit, the GST was claimed on purchase but because it was consumed by the employee privately, the GST shouldn’t be claimed and the GST on FBT adjustment reverses the original claim.

It is incorrect to split the total FBT payable between two taxes and the GST being re-claimed in the next GST return. Doing so is like claiming GST on a sale.

Insurance premiums

Most medical insurance schemes are subject to FBT, so the premiums you pay on behalf of your employees are liable for FBT.

Motor vehicles – FBT or not?

If you provide vehicles to your employees, you may not need to return FBT on the vehicle for part of the regular workweek provided that the employee is away on business without access to the vehicle, the vehicle can’t be parked safely at company premises, the employee is required to work from home or operates out of the vehicle for work purposes.

We hope this short guide can help answer your questions! We receive other FBT queries related to overseas trips, discounted, or subsidised goods and services, unclassified employee benefits, charities and FBT rates. If you want more answers, just give us a buzz and fire away! Let’s make sure your FBT obligations are being met!

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