What is fringe benefit tax
Fringe benefit tax (FBT) is a tax on benefits you provide to your employees. It applies to things such as:
- work vehicles available for personal use
- subsidies on gym memberships or insurance
- discounted goods and services.
FBT doesn't apply to things already taxed for the employee, like:
- salary and wages
- cash bonuses
- employee allowances.
How FBT works
There are four main groups of taxable fringe benefits:
- motor vehicles available for personal use
- free, subsidised or discounted goods and services
- low-interest loans (other than those provided by life insurance companies)
- employer contributions to sickness, accident or death benefit funds, specified insurance policies, and superannuation schemes not subject to employer superannuation contribution tax (ESCT).
You pay FBT on the cost of the benefit to the employee, for example the cost of the car for the portion of time it's available for personal use.
When you first start giving your employees the benefit, you need to register for FBT with Inland Revenue. You can register online or by calling Inland Revenue.
Learn about FBT - Inland Revenue
FBT doesn’t apply to compulsory KiwiSaver employer contributions. These are taxed via employer superannuation contribution tax (ESCT). FBT applies to any KiwiSaver employer contribution not subject to ESCT or PAYE.
Learn more about Employer superannuation contribution tax (ESCT)
Filing your FBT return
You can file your FBT return either:
- quarterly
- annually for the tax year
- annually for your income year.
Your choice might be limited depending on the type of company you have and how much tax you pay each year.
Common mistakes
Avoid these common mistakes when paying FBT:
- Realising you have to pay FBT too late – if you find out after you've been giving taxable benefits for a while, you'll have to backdate your tax payments, which can result in a big bill.
- Not working out the financial implications – FBT can be expensive, so work out if you'll be better off just offering higher salaries or regular bonuses instead.
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