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Fringe benefits are being considered as non-cash benefits being provided to the employees of the organization. These are the benefits which supplement money or wage income earned by the person being involved.
This is a kind of tax being paid by the employer on fringe benefits being provided by him to the employees. The cash benefits are being taxed through income tax but the non-cash benefits are not being taxed. FBT works towards taxing the non-cash benefits, therefore, ensuring that, areas are being kept alive in the course of doing the working. The examples of fringe benefits include company car, health care, educational assistance, housing allowance, vacation pay, sick pay, meals and employee discounts. All these fringe benefits are being taxable unless these are being considered to be exempt by the parties.
Examples of fringe benefits which are tax exempt are being provided below:
a. Accidental and health benefit.
b. Achievement awards.
c. Adoption assistance.
d. Dependent care assistance.
e. Education assistance.
f. Employee discount
Points to be noted
a. The fringe benefits are being provided to associates of employees. The associates include members of the family. The fringe benefits are being provided on behalf of the employer.
b. an employee is being different in comparison to contractor and fringe benefits are only for the employee and its associates.
The discussion made in Reference to New Zealand Fringe Benefit Provisions
FBT Rates
Year Ending | Tax Rate |
2014 | 46.5% |
2015 | 47% |
2016 | 49% |
2017 | 49% |
2018 | 47% |
Registration for Fringe Benefit Tax
An organization has to take registration before it could move forward with providing fringe benefits to its employees. FBT number is the same as tax file number of the employee. One can do registration with FBT once the person carries out an activity of filing of Employee Registration Form. Once the person is being registered for Fringe benefits tax, he would be liable for carrying out the following activities.
a. Finding out the rules for Fringe benefits being provided by the person.
b. Selection of filling frequency.
c. Choose an FBT rate and use it for the purpose of calculation of Fringe benefit.
d. Filing of FBT returns and making payment for the same before the occurrence of a due date.
Types of Fringe Benefits
The following are the kinds of Fringe benefits being provided to the people. The Fringe benefits include the following:
a. Motor vehicles.
b. Goods and services.
c. Low-interest loans.
d. Employee’s contribution.
1. Motor Vehicles: If a person is being involved in making the vehicle available to an employee or to a shareholder and employee and this is being used by the person in a private way then, Fringe benefit is going to be applicable for the person.
Exemptions from Fringe Benefit Taxes
a. Vehicles which have weight in excess of 3500 kilograms.
b. The designing of the vehicle is not being made for the purpose of carrying of passengers.
c. The exterior of the vehicle shows business signage.
d. The employee is being notified that the vehicle is being used for movement between office and home.
e. Regular record checks can be carried out for ensuring that, the employees is being following the restrictions.
f. Vehicle on emergency calls.
g. Used for out of town travel.
2. Goods and Services: Employer is going to make payment of FBT at the time when he is providing goods and services to the employees at standardized rates or discounted rates. Exemptions are available in the following instances.
a. An employer can provide up to $300 of goods and services for free, subsidized and discounted price per employee per quarter with making payment of Fringe benefits tax.
b. If the person is making payment of annual returns then, exemption of $22500 is being allowed to the person. The maximum level of exemption which can be claimed by the person is being at the level of $22500 per year. In case, the value of benefits exceeds $22500 then, the employer will be required to make payment of FBT on the entire amount of the benefits being claimed by the person during the year being taken into consideration.
3. Low-Interest Loans: If the employer is providing loans to the employees at lower interest rates then, fringe benefits are going to be applicable. The following loans do not have applicability of Fringe benefit taxes or other rules are being taken into consideration in the course of taxation.
i. Advances in wages.
ii. Loans to holders of life insurance policies.
iii. Expense accounts of the company.
iv. Share purchase scheme based loans.
v. Share loans of employees.
4. The contribution of Employer: The contribution of Employer: On certain contributions, it is going to be necessary to make payment of certain areas. The contributions in the course of these things will include the following areas.
i. Sickness, accident or death benefit funds.
ii. Life, pension, and personal accident based policies.
iii. Funeral trusts
iv. Friendly society insurance funds.
The taxable value of employer contribution is the total premium being paid or the amount being contributed inclusive of GST. The organization is required to carry out filing of quarterly returns unless different filing frequency is being used.
The table provided below shows the return and payment due dates for each of the quarters being taken into consideration.
|
Quarter |
Due Date |
|
Quarter 1 |
20th July |
|
Quarter 2 |
20th October |
|
Quarter 3 |
20th January |
|
Quarter 4 |
31st May |
Annual FBT Return
This return is for the employees who are filing the returns on yearly basis. The return is for the period beginning from April and ending to March. The person needs to make the filing of FBT return by 31st of May. The annual filing of FBT returns can be made at the following instances.
a. Gross PAYE and superannuation contribution for the previous year was lower than $500000.
b. The person was not an employee of the organization in the previous year.
In this system, the employer will make a deduction of the income tax from the salary being paid to the employee.
Fringe Benefits Tax Rates
In total, there are three categories of Fringe Benefit tax rates. The categories of tax rates include the following:
· Single rate
· Short form alternative rate
· Full alternative rate
ü Single Rate: The single rate is 49.25%. This rate is the highest rate of FBT. The organization can make application of his rate on all the fringe benefits being provided. The usage of single rate is the easiest option but if the employee earns lower than $70000 then, the organization will end up making an overpayment of the same.
ü Short Form alternate rate: In this particular rate, 49.25% of all attributed benefits and non-attributed benefits being provided to major shareholders are being taken into consideration. In case of non-attributed benefits, 42.86% is being taken into account.
a. Attributed benefits: These are the fringe benefits which are being assigned to a single employee such as private healthcare or vacation pay.
b. Non attributed benefits: These are the fringe benefits which are being assigned to various employees within the organization. The benefits are being shared among the employees.
ü Full alternate rate: The application of this rate is made only to the attributed benefits. These are the benefits which are being assigned to various employees within the organization. This is a time consuming and lengthier process but it also results in saving up of time to a greater level.
The full alternate rates are being provided below
ü 11.73 % for FBICR of $0 to $12,530
ü 21.21 % for FBICR of $12,531 to $40,580
ü 42.86 % for FBICR of $40,581 to $55,980
ü 49.25 % for FBICR of over $55,981
Filing of Fringe Benefit Return
FBT required to be paid: It is not being notified about the amount of FBT being required to be paid. The organization is required to make an assessment of FBT on its own at the time of filing of FBT returns. The FBT due date is being dependent upon filing frequency being opted by the employer. The due date is being mentioned at the top of the return which is being filed by the person. There are three kinds of return forms which can be used for filing FBT returns. The filing forms include the following:
Quarterly (IR420)
Income year (IR421)
Annual (IR422)
Single Rate Calculation Sheet
a. Annual FBT taxable value calculation sheet is IR 429
b. Income year taxable value calculation sheet is IR 428
c. Quarterly FBT Taxable value calculation sheet is IR 427
Alternate Rate Calculation Sheets
ü Annual FBT taxable value calculation sheet is IR 419
ü Income year taxable value calculation sheet is IR 418
ü Quarterly FBT Taxable value calculation sheet is IR 417
Following are the measures which can be adopted for ensuring that, FBT liability is being reduced by the organization.
a. Reduction in fringe benefits and making the replacement with cash benefits
b. Providing those benefits which are being exempt from FBT
c. Providing benefits for employees for which income tax deductions are being claimed for the purpose of claiming income tax deductions in case they would have had paid the money or not.
Salary packaging is also being referred as the activity of salary sacrifice. In case of salary packaging, the employees give a part of his salary in the case and receive non-monetary benefits. The income tax is being paid on the monetary value of salary, therefore; there is a reduction in the level of income tax being required to be paid by the person. In this case, the employer will face the liability of fringe benefits tax being required to be paid on the non-monetary benefits. The items which are being commonly included in the course of salary packaging include the following items.
a. Mobile phones.
b. Laptops.
c. Vehicles.
The employers are being required to make sure that they provide details of the income being paid to the employees at the end of a year. This is being termed as payment summary or pay as you go. The FBT is required to be paid by the employer but the employee is also being required to provide details of the fringe benefits being received by him in the course of doing the tasks. The reportable fringe benefits are being grossed up by way of usage of the lower rate of gross-up.
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