Category Archives: FBT

BDO New Zealand – Taxlab FBT training

Wednesday 13 October 2021, 11am – 12pm

This training is exclusively for BDO New Zealand and is available to all staff members across all offices.

We will be hosting a webinar to share how to use our FBT software for a wide range of clients, from small companies with a few motor vehicles to larger enterprises with hundreds of employees. Training will include:

  • Managing input data
  • Review and sense checks
  • Automatic Q4 attribution calculation
  • Generate cost centre reports
  • Generate client reports and deliverables

Please register below:

2022 Fringe Benefit Tax (FBT) Rates

2022 FBT Rates are Skyrocketing

New FBT Rates

The FBT rate changes came into effect on 1 April 2021: 

  • The single rate has moved from 49.25% to 63.93%; 
  • The alternate rate has increased from 43% to 49.25%; 
  • The pooling rate moved from 42.86% to 49.25%. 

The Impact Is a 30% Increase in FBT

Inland Revenue has advised that around 90% of taxpayers currently use the single rate to calculate their FBT. If those same taxpayers continue to use the single rate for 2021/2022 tax year, they will see a significant 30% increase in their FBT liability.

How to Minimise the Increase

Employers can perform an FBT attribution calculation in the final FBT quarter (1 January to 31 March each year). This means benefits provided over the course of the year are taxed at each employee’s marginal tax rates per their income level.

It will be more important for taxpayers to use attribution for the 2021-22 FBT year in order to keep FBT cost increases to a minimum. This is especially the case where there are a large number of employees earning under the top tax rate threshold of $180,000 p.a.

Example:

Please check out the table below for a simple illustration of how the tax liability differs between single rate and attribution in 2021 and in 2022.

EmployeeBenefitPayBenefit
Value
2021
Single Rate
2022
Single Rate
2022
Attribution
JohnMotor vehicle$150,000$8,000$3,940$5,114$3,940
JaneInsurance$100,000$3,000$1,478$1,918$1,478
JimmyGift$60,000$400$197$256$171
Totals$5,615$7,288$5,589

When Should I Start Looking Into This?

Now. In order to be able to perform your attribution calculation in the final quarter of 2021/2022, you need to ensure you have the right data available. This includes knowing which employees have received which benefits and the corresponding value. Further, there are significant cash flow benefits in having the confidence to lock in the alternate rate for the first 3 quarters of the FBT year.

How to Simplify the FBT Attribution Calculation

Contact us! FBT calculation software like Taxlab is available to make FBT compliance much easier and more robust while helping you save tax costs. We would be happy to organise a demo for you. Otherwise, you can also get in touch with your tax adviser to evaluate your options based on your requirements and resources.

FBT Resources

Online

Webinars

The death of Microsoft Silverlight

Microsoft Silverlight is an application framework for running internet applications (similar to Adobe Flash).

We have used Silverlight to run our FBT software since 2009.

Silverlight is nearing the end of it’s useful life and you may already be experiencing issues with it. Google Chrome blocked Silverlight in September 2015 and Firefox did the same in March 2017. It is not supported in Microsoft Edge and Microsoft will end all support by October 2021.

FBT Rates

FBT rates are a major risk area for Excel FBT calculators

It is always worth checking FBT rates in your excel spreadsheets as the rates do change over time and there were significant changes in the 2011 and 2012 FBT years. FBT rates 2012 (for the year ended 31 March 2012) are different to FBT rates 2011. FBT rates 2011 were blended because it was a transitional year (due to the 1 October 2012 changes to income tax rates). Its now business as usual with FBT rates 2012 based on actual marginal income tax rates rather than blended ones.

Quarterly FBT rates

These are the FBT rates you apply each quarter depending on which FBT method you are electing to use. If you are attributing fringe benefits to employees in Quarter 4 to lower your overall FBT rate, you have the option of paying at 43% or 49.25% in the first three quarters as an estimation of your final effective FBT rate under attribution. If you pay any of the first three quarters at 43% then you must attribute benefits in Quarter 4. If you pay all of the first three quarters at 49.25% then you can forgo the attribution calculation in Quarter 4 and simply pay the whole year at 49.25% (which can be very expensive).

2015 quarterly FBT rates

Quarter Single rate option Alternate rate option
Quarter 1 49.25% 43% or 49.25%
Quarter 2 49.25% 43% or 49.25%
Quarter 3 49.25% 43% or 49.25%
Quarter 4 49.25% Attribution

2014 quarterly FBT rates

Quarter Single rate option Alternate rate option
Quarter 1 49.25% 43% or 49.25%
Quarter 2 49.25% 43% or 49.25%
Quarter 3 49.25% 43% or 49.25%
Quarter 4 49.25% Attribution

2013 quarterly FBT rates

Quarter Single rate option Alternate rate option
Quarter 1 49.25% 43% or 49.25%
Quarter 2 49.25% 43% or 49.25%
Quarter 3 49.25% 43% or 49.25%
Quarter 4 49.25% Attribution

2012 quarterly FBT rates

QUARTER Single rate option Alternate rate option
Quarter 1 49.25% 43% or 49.25%
Quarter 2 49.25% 43% or 49.25%
Quarter 3 49.25% 43% or 49.25%
Quarter 4 49.25% Attribution

2011 quarterly FBT rates

QUARTER Single rate option Alternate rate option
Quarter 1 61% 49% or 61%
Quarter 2 61% 49% or 61%
Quarter 3* 49.25% 43% or 49.00%
Quarter 4 49.25% Attribution
*Note that there is a difference of 0.25% between the single rate and highest alternate rate.

2010 quarterly FBT rates

QUARTER Single rate option Alternate rate option
Quarter 1 61% 49% or 61%
Quarter 2 61% 49% or 61%
Quarter 3 61% 49% or 61%
Quarter 4 61% Alternate rate

Marginal income tax on cash pay rates

FBT rates for the tax on cash pay calculation when attributing fringe benefits to an employee under the alternate rate option in quarter four are as follows. These are the same marginal tax rates that are used for income tax purposes.

2015 tax on cash pay rates

2015 Cash pay band 2015 marginal income tax rates
$0 to $14,000 10.50%
$14,001 to $48,000 17.50%
$48,001 to $70,000 30.00%
$70,001 and above 33.00%

2014 tax on cash pay rates

2014 CASH PAY BAND 2014 marginal income tax rates
$0 to $14,000 10.50%
$14,001 to $48,000 17.50%
$48,001 to $70,000 30.00%
$70,001 and above 33.00%

2013 tax on cash pay rates

2013 CASH PAY BAND 2013 marginal income tax rates
$0 to $14,000 10.50%
$14,001 to $48,000 17.50%
$48,001 to $70,000 30.00%
$70,001 and above 33.00%

2012 tax on cash pay rates

2012 CASH PAY BAND 2012 marginal income tax rates
$0 to $14,000 10.50%
$14,001 to $48,000 17.50%
$48,001 to $70,000 30.00%
$70,001 and above 33.00%

 2011 tax on cash pay rates

2011 CASH PAY BAND 2011 Marginal income tax rates
$0 to $14,000 11.50%
$14,001 to $48,000 19.25%
$48,001 to $70,000 31.50%
$70,001 and above 35.50%

 2010 tax on cash pay rates

2010 CASH PAY BAND 2010 Marginal income tax rates
$0 to $14,000 12.50%
$14,001 to $48,000 21.00%
$48,001 to $70,000 33.00%
$70,001 and above 38.00%

Marginal income tax on all-inclusive pay rates

FBT rates for the tax on all-inclusive pay calculation when attributing fringe benefits to an employee under the alternate rate option in quarter four are as follows. These rates are the marginal income tax rates grossed up as the value of fringe benefits is always net of tax (rather than cash payments which are a gross value). The FBT rates are not an exact gross-up as rounding has been applied in the legislation.

2015 tax on all-inclusive pay rates

All inclusive pay banding 2014 marginal FBT rates
$0 to $12,530 11.73%
$12,531 to $40,580 21.21%
$40,581 to $55,980 42.86%
$55,981 and above 49.25%

2014 tax on all-inclusive pay rates

All inclusive pay banding 2014 marginal FBT rates
$0 to $12,530 11.73%
$12,531 to $40,580 21.21%
$40,581 to $55,980 42.86%
$55,981 and above 49.25%

2013 Tax on all-inclusive pay rates

All inclusive pay banding 2013 marginal FBT rates
$0 to $12,530 11.73%
$12,531 to $40,580 21.21%
$40,581 to $55,980 42.86%
$55,981 and above 49.25%

2012 Tax on all-inclusive pay rates

All inclusive pay banding 2012 marginal FBT rates
$0 to $12,530 11.73%
$12,531 to $40,580 21.21%
$40,581 to $55,980 42.86%
$55,981 and above 49.25%

2011 Tax on all-inclusive pay rates

All inclusive pay 2011 Marginal FBT rates
$0 to $12,390 12.99%
$12,391 to $39,845 23.84%
$39,846 to $54,915 45.99%
$54,916 and above 55.04%

Note that FBT rates and banding thresholds have changed.

2010 Tax on all-inclusive pay rates

All-inclusive pay 2010 Tax on all-inclusive pay rates
$0 to $12,250 14.29%
$12,251 to $39,110 26.58%
$39,111 to $53,850 49.25%
$53,851 and above 61.29%

FBT pooling rates

FBT rates for pooled benefits are applied as follows. You always have the option of paying FBT at the highest rate on a benefit if you choose to do so but using the legislated employee pool rate for benefits that can be pooled can result in significant FBT savings.

2015 FBT pooling rates

Pool 2014 FBT POOLING RATES
Shareholders 49.25%
Employees 42.86%

2014 FBT pooling rates

Pool 2014 FBT POOLING RATES
Shareholders 49.25%
Employees 42.86%

2013 FBT pooling rates

Pool 2013 FBT POOLING RATES
Shareholders 49.25%
Employees 42.86%

2012 FBT pooling rates

Pool 2012 FBT POOLING RATES
Shareholders 49.25%
Employees 42.86%

2011 FBT pooling rates

Pool 2011 FBT pooling rates
Shareholder 55.04%
Employee 45.99%

2010 FBT pooling rates

Pool 2010 FBT POOLING RATES
Shareholder 61%
Employee 49%

Why your organisation should consider using FBT Software

We strongly recommend you consider our purpose built FBT Software to reduce risk and turnaround times. For 2012 FBT you will once again have to change your FBT calculations. The rate changes from 2010 to 2012 will have destroyed many excel FBT calculators. We strongly recommend you consider our purpose built FBT Software to reduce risk and turnaround times. Please contact us today.FBT rate changes effect the FBT year ended 31 March 2011. Due to the mid year lowering of individual income tax rates (1 October 2010), the 2011 marginal income tax and FBT rates are blended.

The 2010 budget implemented tax rate changes to income tax, GST and FBT rates. It also increased the complexity of FBT calculations and will have destroyed many excel FBT calculators. We strongly recommend you consider our purpose built FBT Software to reduce risk and turnaround times.

How to correct FBT returns

Correcting errors in a filed FBT return is not as simple as washing them through the fourth quarter attribution calculations. The fourth quarter FBT return true-up is just a true-up between FBT rates. Errors in the taxable value of benefits in earlier quarters is not technically part of this process. While these errors can be flushed through the true-up process at a practical level, you may actually just be hiding error corrections that are subject to specific rules in the tax legislation.

FBT return corrections under Section 113A

Under section 113A of the Tax Administration Act 1994, errors can be corrected in the next FBT return after the discovery of the error when:

  • you have filed an FBT return that contains errors; and
  • the errors were a “clear mistake, simple oversight, or mistaken understanding on your part”; and
  • the total discrepancy in the amount assessed in aggregate is $500 or less.

This only be done in the next FBT return after you discover the error. If you find an error relating to the first quarter FBT return while preparing your second quarter FBT return, you can’t wait until the fourth quarter washup to correct it under Section 113A. If you make a Section 113A correction, Inland Revenue require you to document the details including:

  • the return period the error occurred in
  • the FBT amount involved
  • the type of error
  • the FBT return period the correction was made.

We suggest you review Inland Revenue’s Standard Practice Statement 07/03 – Requests to amend assessments (May 07) if you intend using Section 113.

FBT return corrections above the $500 threshold

Technically you will need to file a notice of proposed adjustment. Use of money interest and penalties may be applicable.

We recommend you deal with errors quickly. However, always speak to your tax adviser before contacting Inland Revenue as they will be able to give you practical guidance that will reduce exposures.

What happens when you are using FBT software

FBT software results in fewer errors. It is often implemented as part of wider FBT process improvement that involves better identification of fringe benefits each quarter, which is an area of high risk. FBT software has sense checks to prevent common errors before you file. However, FBT software also makes it easier to pick up prior period errors in Quarter 4 and to true them up as part of the attribution process. Contact us today to find out more about how FBT software can help you reduce FBT errors.