The poodle bug

What is the Poodle bug

A security vulnerability named Poodle Bug was recently identified in an old version of SSL (SSLv3). This may impact some older browsers, which are unsupported by TaxLab. The Poodle Bug is registered in the Common Vulnerabilities and Exposures system as CVE-2014-3566.

Was TaxLab affected

The Poodle Bug only affects older web browsers that TaxLab does not support. In theory this should mean that you were not impacted as it is unlikely you will have been able to use TaxLab from an older unsupported browser.

Actions we have taken

Any time there is a potential threat to the TaxLab system, we conduct a security review. This includes understanding the threat in detail and its potential impact on the TaxLab system and our users. We have disabled SSLv3 for all users of our tax software to ensure they are not vulnerable to this issue (including our tax provision software, income tax return software and FBT software). This should not impact your use of TaxLab as, again, it only affects older unsupported browsers.

What you should do

Keep your web browser up to date as older browsers are more vulnerable to attacks and bugs.

In general, we remind you that its good practice to regularly change any passwords that you use online. You should also use a different password for each site that you use. In particular, you should regularly change your online email password. You should also enable multi-factor authentication if it is available.

If you would like to know more about TaxLab’s response to the Poodle Bug please contact us any time. We don’t publish all of our security precautions (as this would inherently be a poor security practice). However, we would be happy to discuss some of our security precautions with you and how we mitigate risks.

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.

The heartbleed bug

What is the Heartbleed Bug

The Heartbleed Bug is an OpenSSL security flaw that was announced in April 2014. It has since gained a lot of media publicity. The Heartbleed Bug is registered in the Common Vulnerabilities and Exposures system as CVE-2014-0160.

Was TaxLab affected

No. We predominantly use Microsoft technologies including Microsoft Azure, which does not use OpenSSL. As such, TaxLab has been unaffected by the Heartbleed bug. We can assure you that your TaxLab data was not at risk from the Heartbleed Bug. This includes our Tax Provision Software, Income Tax Return Software and FBT Software.

Actions we have taken

Any time there is a potential threat to the TaxLab system, we conduct a security review. This includes understanding the threat in detail and its potential impact on the TaxLab system and our users. We have evaluated Microsoft’s response and release of information regarding Microsoft Azure and Heartbleed. We can rely on their systems as unaffected.

What you should do

While TaxLab was not vulnerable, other services that you use from other companies may have been impacted. If you use the same password for TaxLab as other websites or services, we recommend you change your TaxLab password immediately. Beyond that, no further action is necessary in respect of TaxLab’s tax software system.

In general, we remind you that its good practice to regularly change any passwords that you use online. You should also use a different password for each site that you use. In particular, you should regularly change your online email password. You should also enable multi-factor authentication if it is available.

If you would like to know more about TaxLab’s response to the Heartbleed Bug please contact us any time. We don’t publish all of our security precautions (as this would inherently be a poor security practice). However, we would be happy to discuss some of our security precautions with you and how we mitigate risks.

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.

FBT on car parks provided by employers

We already have FBT on car parks

A lot has been said about the proposed ‘carpark tax’ in recent weeks. I hesitate to comment too formally on the matter because its complex. However, one thing seems to be overlooked in the press coverage so far: There is already FBT on car parks under the current rules. A lot of media reports have been promoting this as a new tax, when in fact its not.

Overview of how it works

Providing a non-cash benefit to an employee is subject to FBT by default. It may then be exempted or valued to zero. Providing a carpark to an employee is an unclassified benefit, meaning it is caught under the catch all rather than specifically. However, there is an exclusion for benefits that are provided on-premises. This includes car parks as long as they are on a business premises.

When is a car park on-premises?

This is where it gets a little weird. If you lease a property, or even just a single car park and have an exclusive right to it, then that is a business premises and the exemption applies. However, if you don’t have an exclusive right to it because you license the right to use one park from many (i.e. a park on a floor shared with other people) then this is not your premises and you have to pay FBT. In summary

  • Leased car parks – Exempt from FBT
  • Licensed car parks – FBT is payable

See IRDs Public Ruling – BR Pub 99/6 for the detail regarding FBT on car parks.

Are the proposed rules fair?

Are the proposal for FBT on all car parks within the Auckland and Wellington CBDs fair? In my opinion, yes and no. FBT on car parks where they are valuable, and clearly part of an employee’s remuneration package seems fair. However, in the real world – there just doesn’t seem to be a practical way to get it right. Making car parks in the Auckland and Wellington CBDs subject to tax is arbitrary and unfair particularly if you are on the wrong side of the road within the boundaries.

Is there a better way? We haven’t come up with one and neither has IRD. Until they have the status quo seems to be the way to go.