FRINGE BENEFITS TAX (FBT)

Updated November 12th 2013

With 31 March and the end of the Fringe Benefits Tax year just around the corner, now is the time to take advantage of last minute tax planning opportunities. Please find below a summary of the most common types of fringe benefits, and their tax treatment:

  • Motor Vehicle – This is the most common fringe benefit, and arises where an employer’s car is used by an employee for any private purposes, notwithstanding that the vehicle is also used for business purposes. An exemption applies for taxis, panel vans, utilities or unregistered cars.

    There are two methods for calculating the taxable value of the motor vehicle fringe benefit:
    1. Statutory Formula Method – calculated based on the number of kilometres travelled during the FBT year. The more kilometres travelled the lower the taxable value.

    2. Operating Cost Method – calculated by applying the log book private use % against the actual running costs of the car for the FBT year. The record keeping for this method is more detailed than for the statutory formula method but can often result in a much lower FBT amount.

 

  • Car Parking Benefit – FBT liability arises were a car is parked on a business premises that is within 1 kilometre of a commercial car parking station. An exemption applies to small businesses with ordinary income of less than $10 million, where the car is not parked in a commercial parking station.
  • Exempt Benefits – There are a variety of benefits which are FBT free, including PDA’s, mobile phones, portable printers, laptop computers, and tools of trade primarily used for business purposes.
  • Minor Fringe Benefits – Minor and infrequent benefits of less than $300 are exempt from FBT.
  • In-house Benefits Exemption – Allows the employer to reduce the taxable value of in-house benefits by up to $1,000 per employee per year.
  • Meal Entertainment on employer’s premises – Food and drink provided to employees on ordinary working days are FBT exempt.
  • Meal Entertainment outside of employer’s premises – Generally, all meal entertainment provided to staff outside of business premises are subject to FBT.
  • Expense Payment Benefit – This is where an employer pays or reimburses private expenses incurred by employees, e.g. school fees; private telephone bills; rates and land taxes; life and health insurance premiums etc.