What items attract FBT

A benefit provided to an employee by the employer attract FBT, the benefit is divided into two parts classified and unclassified:

Note **De Minimis rules for exceptions to unclassified fringe benefits.  If the taxable value of the fringe benefit is not greater than $300/employee/one quarter then no FB is payable.  Section RD 45(2)(a).

Specific rules

Motor vehicles

To calculate the taxable value of the fringe benefit of motor vehicles (classified fringe benefit), the formula below is used.

5% x Consideration x number of days**
90 days

** Number of days in terms of the Income Tax Act 2007, section RD 29(5)(a), refers to the actual number of days in the quarter where the motor vehicle was used for private use.

Deductions from number of days could be for:
1) If there was no availability of the vehicle
2) If vehicle was used for emergency purposes
3) If the vehicle was used for business trip away from employees home
4) If the vehicle was used as work related vehicle.

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To calculate the taxable value of the fringe benefit of motor vehicles (classified fringe benefit), the formula below is used.

(Retes x Consideration x number of days** )/ 90(If FBT is paid quartely) or 365(If FBT is paid on income year basis)

** Number of days in terms of the Income Tax Act 2007, section RD 29(5)(a), refers to the actual number of days in the quarter where the motor vehicle was used for private use.

Deductions from number of days could be for:
1) If there was no availability of the vehicle
2) If vehicle was used for emergency purposes
3) If the vehicle was used for business trip away from employees home
4) If the vehicle was used as work related vehicle.

Rates:

Loans (low interest or zero interest)

To calculate the taxable value of the fringe benefit of low interest loans (classified fringe benefit), the formula below is used.

Interest rate %*** x Amount of loan x number of days
365 days

*** Interest rate is calculated by subtracting the actual interest with the prescribed rate. The prescribed rate is set by regulations and published by IRD in TIBs. 

Fringe benefits and Goods

Free or subsidised goods available to the employee are unclassified fringe benefits. Depending on the amount paid by the employee the goods may constitute a fringe benefit. Goods may be manufactured by the employer for sale or purchased by employer for re-sale.

Goods manufactured by employer

Section RD 40(1)(a) states to calculate the taxable value of the fringe benefit the below equation is used:

Selling price (including GST) – the price paid by employee incl GST

Goods purchased or paid for by the employer

Section RD 40(1)(b) states to calculate the taxable value use formula below

Cost price (including GST) – the price paid by employee incl GST

Entertainment and FBT

Entertainment can be subject to FBT if:

The employee can choose when to enjoy the benefit or the benefit is enjoyed outside NZ, and the benefit is not received or used in the course of, or as necessary consequence of, the employee’s employment duties.

Section DD 2 lists the following types of entertainment:
- Corporate boxes, marquees, and similar exclusive areas (permanent or temporary) at sporting, cultural or other recreational events or at activities taking place off the person’s business premises.
- Holiday accommodation (other than which is related to business activities).
- Yachts or other pleasure craft
- Food and drink provided at any of the venues above
- Food and drink provided off the person’s business premises (subject to certain exceptions), or
- Food and drink provided on work premises but in areas reserved, at the time, for senior employees (e.g. board room or executive dining room).