Fringe Benefit Tax
Put simply, Fringe Benefits are non-cash benefits provided to employees over and above their salary or wage. (cash benefits are taxed through the PAYE system.) If something is classified as a fringe benefit it will be subject to fringe benefit tax (FBT)
The FBT system is fairly complex however there are four main groups:
Generally, if a motor vehicle is available for private use by an employee then FBT will apply. Private use and availability on vehicles can become complex because the employee doesn’t necessarily need to be using the vehicle for it to be considered available to them.
Free, subsidised or discounted goods/services
If you are offering goods or services to your employees for either less than it cost you or less then you would charge it to your customers generally this will be considered a fringe benefit.
Low interest loans
If you have entered into a loan agreement with an employee and you are charging interest at below the market value then this will be considered a fringe benefit and fall under the FBT regime. The IRD keeps updated market rates on their website.
Employer contributions to benefit funds, superannuation schemes and some insurance policies
As an employer you will be required to pay FBT on any contributions you make to:
- Sickness, accident or death benefit funds
- Friendly society insurance funds
- Life, pension, personal accident or sickness insurance policies or
- Are a life insurance and offer discounted premiums for your life insurance agents and their families
Basically the only contribution not included is Kiwisaver.
The IRD has an general exemption which means they are not interested in fringe benefits over the following thresholds:
- $300 exemption per employee per quarter for quarter year filers
- $1200 per employee per year for annual and income year filers
If you intend to offer Fringe Benefits or already do so and have any questions, please get in contact with us.