How to Calculate Fringe Benefit Tax (FBT) in New Zealand

Fringe benefit tax (FBT) in New Zealand is a tax payable when certain benefits are supplied to employees or shareholder-employees. These benefits can include things like:

• Motor vehicles available for private use
• Low interest/interest-free loans
• Free, subsidised or discounted goods and services
• Employer contributions to sick, accident or death benefit funds, superannuation schemes, and specified insurance policies (excluding employer contributions to superannuation schemes liable for ESCT (formerly SSCWT)
• Unclassified fringe benefits

These benefits are liable for FBT if they are enjoyed or received by employees as a result of their employment. This could be in a past, present, or even future employment. Employers pay tax on benefits provided to employees or shareholder-employees, even if the benefits are provided through another person/entities. Employers also pay FBT if the benefits are provided to or enjoyed by associates of the employees or shareholder employees. There are exemptions to FBT, but these are not specified in the resource I found​¹​.

There are four different methods for calculating FBT in New Zealand:

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1. Single Rate: This method applies a single rate to all fringe benefits provided. For quarterly filers, this rate is 63.93% for the first three quarters, and in the fourth quarter, it can be either the single rate or the alternate rate if only the single rate was used in the first three quarters. For annual or income year filers, the single rate is also 63.93%​²​.
2. Short Form Alternate Rate: This method applies different rates depending on whether the benefit is attributed to a specific employee or not. The rate is 63.93% for attributed benefits and non-attributed benefits to shareholder employees, and 49.25% for non-attributed benefits to all other employees​²​.
3. Full Alternate Rate: This method requires a separate calculation for each employee who receives an attributed fringe benefit. Non-attributed benefits are pooled and a flat rate is applied: 63.93% for shareholder employees and 49.25% for all other employees​²​.
4. Pooled Alternate Rate: This option applies from 1 April 2021. It might be chosen if you mostly provide attributed benefits to employees who earn within the safe harbour thresholds (up to $160,000 in gross equivalent pay and up to $13,400 each in attributed benefits for the year). For employees who earn within these thresholds, the rate is 49.25%. For employees earning above either of these thresholds, the rate is 63.93%, unless you know that the employee has received less than $129,681 in net pay plus attributed benefits (all-inclusive pay) for the year, in which case you can choose to use 49.25%​²​.

For non-attributed benefits, the rate is 63.93% when one or more recipients are major shareholders, and 49.25% otherwise​²​.

Note that if you file quarterly you can change the rate options during the year, and if you file annually you can choose any of the three rate options. You can change rate options each year. If you use the full or short form alternate rate option in any of the first three quarters, you must use the full or short form alternate rate option in the fourth quarter​²​.

Fringe Benefit Tax Calculator

Type of Fringe Benefit: Motor Vehicles Low-interest Loans Goods and Services Employer Contributions Value of Benefit: Employee's Income: FBT Calculation Method: Single Rate Alternate Rate Short-Form Alternate Rate

Instructions:

To use the Fringe Benefit Tax (FBT) Calculator, please follow these steps:

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1. Select the type of Fringe Benefit from the dropdown menu. The options are Motor Vehicles, Low-interest Loans, Goods and Services, and Employer Contributions.
2. Enter the Value of the Benefit in the provided field. This should be the monetary value of the benefit provided to the employee.
3. Enter the Employee's Income in the provided field. This should be the total income of the employee for the current tax year.
4. Select the FBT Calculation Method from the dropdown menu. The options are Single Rate, Alternate Rate, and Short-Form Alternate Rate. If you're unsure which to choose, refer to the IRD guidelines or consult with a tax professional.
5. Click the "Calculate FBT" button. The total Fringe Benefit Tax payable will be displayed below the form.

DISCLAIMER

Please note that this calculator is intended as a guide only. For a comprehensive understanding of FBT obligations, please refer to the official IRD guidelines or consult with a tax professional.

This Calculator has been created using ChatGPT-4.

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