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What is Fringe benefit tax?

The low-down on fringe benefit tax. FBT are exactly that – the perks of the job that aren’t salary or wages. Things like using a work car out of hours and employer contributions to your Super. As an employer, you have a few options with FBT.

FBT in a nutshell
This is a tax on benefits employees receive through their employment, including benefits provided by someone other than their employer. Cash benefits are treated as normal salary and wages, with PAYE deducted.

There are four main types of taxable fringe benefits:

 

  • motor vehicles available for private use
  • free, subsidised or discounted goods and services
  • low-interest loans
  • employer contributions to funds, insurance and superannuation schemes.

 
FBT filing periods
There are three types of FBT returns. You can choose one filing option or, if you’re a closely held company with ordinary employees and shareholder-employees, you can choose dual filing if you meet the criteria below.

Quarterly (IR420)
You must file quarterly when your combined annual gross tax and employer superannuation contribution tax (ESCT) for the previous year is over $500,000.You can choose to file quarterly if these are under $500,000.

Income year (IR421)
If you only have shareholder-employees and your annual gross tax and ESCT is under $500,000, or you’re a closely held company and have no more than two vehicles for private use to shareholder-employees, this is the option for you.

Annual (IR422)
Choose this option if your annual gross tax and ESCT for the previous year was $500,000 or less, or you weren’t an employer in the previous year. You can choose to file by income year or annually. There are set dates when you can elect to do this, so IRD knows when you’ll be filing your return and payment.

Monteck Carter will be able to advise which option suits your business – Give us a call today 09 273 3682