Home > Updates > Fringe Benefit Tax – getting the basics right and staying ahead of upcoming changes
Fringe Benefit Tax (FBT) is a tax payable by employers on certain benefits they provide to employees outside of standard wages or salary. These “fringe benefits” can be valuable additions to remuneration packages, often critical to attracting and retaining top talent – but if not managed correctly, they can also create hidden tax liabilities.
FBT is in place to ensure there is equity between cash and non-cash remuneration, and Inland Revenue (IR) is placing increasing focus on employer compliance.
While any non-cash benefit provided to an employee may attract FBT, some of the most common classes of benefits that attract FBT involve:
The FBT regime has evolved over time without an overarching legislative strategy, and as a result it has become increasingly complex to administer. Some common errors or misconceptions include:
Officials recognise the increased complexity of the regime and the resulting compliance costs for employers. Some options currently under consultation are focused on Motor Vehicles & Unclassified Benefits.
Motor vehicles
Unclassified benefits
To try and address compliance burdens involving tracking low value unclassified benefits against de minimis thresholds, and navigating the overlap with the entertainment tax regime, IR has proposed either excluding all benefits provided below $200, and/or expanding the list of exempt items (which may include some items currently captured in the entertainment regime).
If you provide any of the above to your employees, it’s important to reflect on your FBT obligations carefully. Given the changes in the regime, now is a good time to:
We’re here to help. If you’re unsure about your current FBT obligations or want to prepare for the proposed changes, our team can assist with a practical review and tailored advice. If you’re unsure whether your current benefits trigger FBT or if you’re handling your obligations correctly, our team can review your situation and help you stay compliant. Talk to our team of expert Advisors today.
Nexia New Zealand is one of New Zealand’s leading full-service chartered accounting and business advisory consultancy firms, offering the full range of chartered accounting, business advisory, corporate advisory, tax, audit, insolvency, liquidation and receivership services.
Nexia New Zealand has four offices throughout New Zealand: Victoria Street in Christchurch, Albany on Auckland’s North Shore, Newmarket in the Auckland CBD and Hastings in Hawke’s Bay.