Fringe Benefit Tax

The rules for fringe benefit tax (FBT) affect the way you complete your fourth or final quarterly return (for the period 1 January to 31 March 2001) or annual or income year returns (for the year ended 31 March 2001). You have a choice of FBT rates to use. You can choose to work out your FBT to pay using the Single FBT rate (formerly Flat Rate), or the Alternate Rate calculation process (formerly Multi-rate).

The FBT Quarterly Return covers the Alternate Rate calculation method only. This involves attributing fringe benefits to individual employees who have received them and calculating the FBT to pay on the cash remuneration and fringe benefits they received in the year.

NOTE: The FBT Calculator utility uses the Alternate Rate calculation method only.

If you are completing the Alternate Rate calculations make sure you have the following information before you start filling in this return:

Your completed taxable value calculation sheets for the year, showing the amount of the taxable value for motor vehicles, low-interest loans, free or subsidised or discounted goods and services and employer contributions to funds, insurance, health insurance and superannuation schemes.
Cash remuneration details for each employee where the fringe benefits they have received have been attributed.
As the calculator is designed for quarterly filing only, your first three quarters' FBT returns. After you have entered the appropriate data, you may print out the calculation sheet and copy the figures to your IR-420 form, as provided by the IRD.

Notes

Income attributed under the attribution rules Cash remuneration now includes any amount of income attributed under the attribution rules. The attribution rule applies when an employee structures their employment relationship so that an entity, such as a trust or company, is between them and the services they provide to their employer.
Low-interest loans provided by life insurers Low-interest loans provided by life insurers are now deemed to be non-attributed benefits.
Non-resident shareholder-employee If remuneration is paid to a non-resident shareholder-employee, the calculation of the deemed amount of tax payable on the remuneration includes any tax credit as if the shareholder-employee was a resident for fringe benefit tax purposes.
Associated persons receiving benefits Fringe benefits provided to an associate of an employee are to be taxed in the hands of the employee rather than the associate.
Subsidised transport The subsidised transport exception that allows employers to pool benefits, if all employees have the same or similar entitlement to the benefit, now includes employers who are closed companies.

Options to consider – Single Rate or Alternate Rate calculations

The following factors may help you when deciding which option best suits your business's particular circumstances:

The income level of your employees who receive fringe benefits.
If your employees receiving fringe benefits are higher income earners (over $60,000 annually) you should consider using the single rate when calculating FBT. This method involves little change from what you do at present.
If your employees receiving benefits include some on low to middle income levels, you should consider the new calculation process.
The amount of non-attributed benefits (under the Alternate Rate option, non-attributed benefits are taxed differently).
The record keeping and calculations required under the Alternate Rate process.

You cannot use a combination of the Single Rate option and the Alternate Rate calculations option. You must select only one option.

Timing Issues

If you elect the Alternate Rate option when determining the rate to apply to a shareholder-employee there are three possible scenarios:

All the remuneration details relating to a shareholder-employee are known. You must use the Alternate Rate calculations.
If some of the remuneration details are not available at the time you complete the return you can use the Alternate Rate when calculating the FBT payable on the attributed benefits provided to that shareholder-employee. When you complete your next year's fourth quarter or annual FBT return you align the FBT payable from this year with the actual remuneration received by the shareholder-employee using the Alternate Rate calculations.
If some of the remuneration details are not available at the time you complete the return you can use the Single Rate to calculate FBT payable on the attributed benefits provided. No further calculations are required next year when using this option.

Attributed Income

Cash remuneration now includes any remuneration provided by an employer. This includes any amount of income attributed under the attribution rule.

The attribution rule applies when an employee structures their employment relationship so that an entity (a trust or company) is between them and the services they provide to their employer.

The person providing the services and the trust or company must be associated persons.

The company or trust receives the payment for the services performed by with the actual remuneration received by the employee using the Alternate Rate calculations.

If some of the remuneration details are not available at the time you complete your return, you can use the flat rate to calculate FBT payable on the attributed benefits provided.

No further calculations are required next year when using this option. The rules for shareholder-employees and attributed income do not apply to income year filers as the due date for this return is aligned with the end-of-year tax date of the employer and therefore all necessary income information would be known by this date.

As with other benefits provided, all benefits must either be paid at the Single Rate or calculated using the Alternate Rate process. You cannot use both options.

Completing the IR 420

Use the FBT Calculator utility. The FBT Calculator calculates FBT using the Alternate Rate.