5.1 FringeBenefitTax%28word%290

5.1 FringeBenefitTax%28word%290 - ACIS 254 26 MARCH 2009...

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ACIS 254 26 MARCH 2009 LECTURE 14 & 15: FRINGE BENEFIT TAX and CAPITAL GAINS TAX Administration: See handout on Capital Gains Tax NZT Reading: NZT 18. 1. Introduction [NZT 18.1 – 18.2.1] What is a fringe benefit? It is a non-cash benefit received by an employee as a consequence of their employment, or a benefit received by a shareholder-employee. 1 Situations where a benefit is deemed to be provided or granted are extremely wide. Employers are liable for FBT if an employee receives a benefit from them (the employer) or some other person under an arrangement with them (the employer) [NZT 18.4.2]. The ITA 2007 provides that a person who provides a fringe benefit to another person must pay FBT in accordance with the “FBT rules”: s BE 1(4) ITA 2007. The “FBT rules” are defined in s YA 1 ITA 2007 to mean the provisions listed in s RD 25 ITA 2007. These include ss CX 2 – 38; ss GA 2, GB 31, GB 32, ss RD 26 to 63; Schedule 1 (Part C) and Schedule 5 ITA 2007. The reasons for the introduction of FBT on 1 April 1985 were: 1. Broaden the tax base (reducing the government’s reliance on personal income tax) & to supply more revenue. 2. Overcome the restrictions of the law at that time which often did not tax non-cash (‘in-kind’) benefits i.e., improve equity in the tax system by ensuring non-cash benefits provided to employees were also subject to tax. 3. Encourage a switch to cash remuneration – hence FBT is imposed on the employer. The tax was introduced as part of a review of the personal income tax system. Unlike employment income (eg salary and wages), which is taxed in the employee's hands, the employer is taxed not the employee: s RD 26 ITA 2007. FBT is paid by employers on a quarterly basis (ie 4 times a year), or in certain cases on an income year/annual basis. Each quarter comprises three months as follows: April – June (Quarter 1); July – September; October – December, January - March. The Commissioner of Inland Revenue also has the discretion to exempt an employer from the obligation to furnish a quarterly return where the employer has been filing a nil return because no fringe benefits have been granted or provided for four consecutive quarters. There are penalties for the late payment of FBT etc [NZT 18.13.5]. Note : The provision of free accommodation is treated as employment income under s CE 1(c) ITA 2007 and is not subject to FBT: s CX 28 ITA 2007. The cost of providing a fringe benefit is deductible to the employer if the general permission is satisfied (s. DA 1 ITA 2007). Thus, if a car is provided to employees, the employer can deduct costs such as petrol, depreciation etc. FBT itself is also deductible to employers (this has implications for the FBT rate: see Topic 4). 2.
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5.1 FringeBenefitTax%28word%290 - ACIS 254 26 MARCH 2009...

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