Category Archives: FBT

FBT calculator update | Inland Revenue 2012

The FBT calculator available on the Inland Revenue website are up to date for the 2012 FBT rates. (We review them as part of testing our FBT software).

FBT Calculator | Single employee

Fringe benefit tax alternate rate calculator (Inland Revenue)

We found no issues with the 2012 FBT rates or logic during our 2012 testing. The single employee FBT calculator works the same way as prior years and uses the same rounding conventions. The 2012 FBT rates for pooling are clearly shown on the landing page which is helpful.

FBT Calculator | Multiple employees

Fringe benefit tax alternate rate calculation sheet (Inland Revenue)

Again, we didn’t identify any issues from our testing. No changes have been made in how it works and rounding conventions are the same as last year. The 2012 FBT rates for each quarter are on the landing page (again, very helpful).

Other FBT updates

Note that the weird legislative anomaly in 2011 Q3, where the single rate was 49.25% and the top alternate rate was 49.00%, has now gone. The single rate is 49.25% and the top alternate rate is back up to 49.25%. This was a strange rule that was most likely an oversight by Inland Revenue Policy when drafting the legislative changes caused by the 2010 budget. This small issue caused considerable grief for some organisations who maintain internal FBT calculators.

FBT Software | Contact us now

If the Inland Revenue calculators are too slow or simple for your needs, please contact us today for purpose built FBT software.

FBT guide updated by Inland Revenue (IR409 December 2010)

Inland Revenue have released an update to the FBT guide. The update covers the FBT rate changes from the 2010 Budget. These changes were needed due to the extensive impact oft the changes on FBT rates in 2011, 2012 and future years.

FBT guide update in short

Income tax and GST rate changes came into effect on 1 October 2010. This has a major impact on FBT rates, thresholds and calculations.

FBT rates for 2011 are complicated. Blended income tax rates are needed for 2011 due to the mid year headline rate changes. As such FBT rates for attribution are also blended with a shift in thresholds. Quarterly FBT rates for the 2011 FBT year are split between pre and post 1 October 2010 meaning the 2011 Q3 rate is a stand alone rate.

FBT rates for 2012 (and following years) are back to normal (i.e. not blended rates), but are based on the new income tax rates. Rate thresholds have changed in each year just to complicate things.

We have outlined below some of the changes to the FBT guide (IR409). We were hoping for a broader update of the guide at the same time as some of the explanations can be a little confusing. In particular, FBT on pooled motor vehicles, which seems only to cover what happens in quarters one to three, doesn’t seem to strictly follow how the legislation works.

FBT guide updated for the new FBT rates

  • 2010 FBT alternate rates  (found on page 3 of the FBT guide)
  • 2011 FBT alternate rates (found on page 43 of the FBT guide – buried at the back)
  • 2012 FBT alternate rates (found on page 3 of the FBT guide)

The FBT guide is only guidance

While the FBT guide is useful (although a little confusing at times) the legislation is actually a better source of guidance. Firstly  its the law. Secondly, its actually pretty easy to read and understanding it will help you prepare and review returns and discuss issues with your tax adviser and Inland Revenue.

FBT calculator update | Inland Revenue 2011

FBT calculators by Inland Revenue have been updated for the 2011 FBT rates (TaxLab FBT software logic is tested directly against these simple calculators as part of quality control).

The changes to 2011 are complex due to the 1 October 2010 change in income tax and GST rates. This led to blended rates for personal income tax and FBT attribution rates for the 2011 FBT year. There are also changes to Q3 and Q4 optional rates and the GST rate changes effect how fringe benefits are valued and in some cases leads to GST leakage where benefits were acquired at 12.5% but provided to employees after 1 October 2010 (which deems them to be a supply at 15%)

FBT Calculator | Single employee

Fringe benefit tax alternate rate calculator (Inland Revenue)

We tested against this today and didn’t find any issues. The rounding logic now appears to be the same as the multi-employee calculator (it used to be slightly different). The FBT rates for pooling have been included on the landing page which is a useful reminder.

FBT Calculator | Multiple employees

Fringe benefit tax alternate rate calculation sheet (Inland Revenue)

Against, no issues identified based on our testing. The FBT rates for quarters one to three are included on the landing page (again, a useful reminder).

Other FBT updates

The incorrect FBT rates showing in e-FBT appears to also have been fixed. No more declaring you are paying at 59%, which was an FBT rate that never eventuated due to the change in Government and subsequent change in tax rates.

FBT Software | Contact us now

FBT calculators by Inland Revenue serve a very useful purpose for small employers. However, FBT software should be used where employers provide fringe benefits to more than 25 employees, are performing attribution calculations or where FBT on motor vehicles is involved.

Please contact us to find out more.

FBT on work related vehicles

Can a double cab ute qualify for the work related vehicle exemption from FBT. We were asked this question recently at a TaxLab FBT training course.

The answer is yes, it can qualify. However, just because the vehicle is a double cab ute doesn’t mean you automatically get the exemption.

Work related vehicle FBT exemption

A work related vehicle creates a fringe benefit on any day that it is available for private use (the same as when other vehicles are available for private use). However, travel between home and a business premises (and incidental use) is legislatively excluded from being private use, provided that

  • the travel is in a work related vehicle; and
  • the travel is necessary and is a condition of their employment.

What’s a work related vehicle

Four tests must all be met for a vehicle to be a work related vehicle

  1. The vehicle must not be a car (Inland Revenue’s view is that to meet this test “the principal design of the vehicle cannot be for carrying passengers”); and
  2. The exterior of the vehicle must permanently and prominently display the name of the employer, or the business logo, acronym or other identification; and
  3. The employer, must have notified the employee in writing that the vehicle is available only for travel between home and work (or travel incidental to business travel); and
  4. The employer conducts and records checks to ensure that employees are actually following this restriction in real life.

Common errors

The exemption is very narrow. Most overlooked is that the exemption only covers exclusive driving between home and a business premises. If the employee uses a work related vehicle even once for private use (e.g. driving from home to the supermarket and back again) then the Inland Revenue will consider that the vehicle is always available for private use.

Also commonly overlooked is that the travel must be necessary and a condition of employment (a written condition in the opinion of Inland Revenue).

Partial exemption for weekend use

Inland Revenue does allow a partial exemption, essentially allowing employees to use a work related vehicle on weekends and public holidays only. The work related vehicle

  • must not be available for private use for most of the week; and
  • can only be available for private use on certain days (for example, weekends and statutory holidays). These days would attract FBT.

How the 2010 Budget impacts FBT rates

Massive impact, lots of risk areas

FBT rates and calculations are heavily impacted by the 2010 budget. GST and personal income tax rate changes from 1 October (part way through the tax year) make the changes very complicated. The 2010 budget changes will first be noticed in Quarter 3 of the 2011 tax year with the real impact hitting in quarter 4.

The good news is you have some time to get to grips with the changes and update any excel FBT calculators that you rely on, or start using professionally maintained FBT Software.

No changes when filing 2011 Quarter 1-2

Business as usual. FBT is still payable under the single rate option at 61% or under the alternate rate option at either 61% or 49%. GST was at 12.5% for the whole quarter so no impact yet.

Everything changes in 2011 Quarter 3

New FBT rates apply. The single rate option is now 49.25% and the alternate rate option at either 49% or 43%. Interestingly, the single rate option is now 0.25% higher than the high alternate rate (previously both were 61%). This means that if you pay at 49% rather than 49.25% you are electing to use the alternate rate (which is irreversible within a year) and must attribute in quarter 4.

The taxable value of fringe benefits remains GST inclusive based on the GST paid when the employer procured the benefit. For motor vehicles the GST inclusive amount is based on the GST paid when the vehicle was originally purchased (by the employer or lessor). However, the deemed GST output tax (paid as FBT on the FBT return) is based on the GST rate at the time the benefit was provided. This could cause GST leakage.

For example, a gift certificate was purchased in September 2010 for $1,125.00 inc GST. It was provided to an employee in December 2010. The value of the supply is $1,150. The employer must pay $150 in its FBT return but only claimed $125 in its September GST return so is $25 worse off.

Unique Blended rates in 2011 Quarter 4

FBT is payable at 49.25% under the single rate option. FBT is payable using the attribution rules under the alternate rate. Attribution calculations use the 2011 individual income tax rates, which are blended rates due to the mid year 1 October change. There are also blended FBT rates for attribution adding to the complexity.

Why you should consider using FBT Software

TaxLab updated and fully tested all 2011 FBT calculations in June. If you aren’t using TaxLab, you should sign up now because the changes are time consuming and complicated. We have highlighted some of the changes below. Please contact us now to find out more about the benefits of FBT software.