As an employer in New Zealand, you may offer fringe benefits to your employees as a part of their employment package. These benefits can include things like health insurance, company cars, and low-interest loans.
However, it’s important to understand that these benefits are subject to Fringe Benefit Tax (FBT) in New Zealand. In this blog, we’ll take a closer look at what FBT is, how it applies, and what the rates are.
What is Fringe Benefit Tax?
Fringe Benefit Tax (FBT) is a tax on non-cash benefits that you provide to your employees. It’s calculated as a percentage of the taxable value of the fringe benefit, and it’s paid by the employer. The purpose of FBT is to ensure that employees are paying tax on the full value of their remuneration, including any non-cash benefits they receive.
How does FBT apply?
FBT applies to a wide range of fringe benefits, including:
- Company cars: If you provide a company car to your employee for private use, this is considered a fringe benefit.
- Health insurance: If you provide health insurance to your employee as part of their employment package, this is considered a fringe benefit.
- Low-interest loans: If you provide a loan to your employee at a lower interest rate than they would get from a bank, this is considered a fringe benefit.
- Staff discounts: If you offer your employees a discount on goods or services that you sell, this is considered a fringe benefit.
The taxable value of a fringe benefit is the cost of the benefit to the employer, less any amount the employee contributes towards it. The amount of FBT that is payable depends on the type of fringe benefit and the employee’s tax rate.
What are the rates?
The FBT rate in New Zealand is currently 49.25%. This means that if the taxable value of a fringe benefit is $100, the FBT payable by the employer would be $49.25. The FBT rate is the same for all types of fringe benefits.
FBT returns must be filed and paid quarterly, and the due date for each quarter is one month after the end of the quarter. It’s important to ensure that you are accurately calculating and paying FBT on any fringe benefits you provide to your employees, as failure to do so can result in penalties and interest charges.
In conclusion, Fringe Benefit Tax is a tax on non-cash benefits that you provide to your employees. It’s important to understand how it applies and what the rates are so that you can accurately calculate and pay any FBT that is due. If you’re unsure about whether a benefit you provide is subject to FBT, it’s always best to seek advice from us.