What is Fringe Benefits Tax (or FBT)?

Well, what is FBT?

FBT, short for Fringe Benefits Tax, are benefits paid to an employee in place of salary or wages, including benefits provided by someone other than their employer. It is separate from income tax and is calculated on the taxable value of the fringe benefits provided. It is different from PAYE as those are cash benefits and treated as normal salary and wages.

Some common examples include:

 ⇒  private use of a work car by an employee or director.

 ⇒  paying private expenses for an employee or director (school fees, health insurance).

The FBT year runs from 1^st April to 31^st March.

There are four main types of taxable fringe benefits:

 ⇒  motor vehicles available for private use.

 ⇒  services and goods which are either free, discounted or subsidised.

 ⇒  low-interest loans.

 ⇒  employer contributions to funds, insurance and superannuation schemes.

FBT does not apply to things already taxed for the employee. These include:

 ⇒  salary and wages.

 ⇒  cash bonuses.

 ⇒  employee allowances.

The prescribed interest rate from 1^st January 2016 is currently at 5.77% p.a. (reviewed quarterly)

But why offer FBT?

Often times, employees need that extra push or a way to keep them content with their job - this is where an employer entice them with non-income related benefits. It's entirely legal and a common form of reimbursement used by businesses for their employees.

How do I provide FBT?

Register with us and we will do the needful for you. Basically, what we do is as follows:

 ⇒  provide all FBT records.

 ⇒  calculate your FBT payment.

 ⇒  lodge a return and pay FBT to the IRD.

What are the filing periods for FBT?

You have three options for filing and claiming returns on FBT. These are:

 ⇒  Quarterly - 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 - 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.

 ⇒  Annually - 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.
Work out the option that best suits your business, or, contact us and we will guide you through it.

And of course, you can always change when you file your returns if you no longer provide fringe benefits

Important FBT Dates

Are there FBT exemptions?

Yes! FBT is not payable if the total taxable value of unclassified benefits provided in the quarter to each employee does not exceed $300 ($1,200 per annum if on annual basis); and the total taxable value in the last four quarters, including the current quarter, of all unclassified benefits provided to all employees, does not exceed $22,500 ($22,500 per annum if on annual basis).