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Property and Tax update
April 12th, 2021
Chris Lynch, CA, Managing Director
Along with a new top tax rate being introduced on April 1, we also have a new top fringe benefit tax rate coming into effect.
What is fringe benefit tax?
Fringe benefit tax, or FBT, is a way of taxing employee benefits. It’s designed to make sure people are paying tax on all types of income, including perks. Because the top tax rate is increasing to 39%, the FBT also needs to rise, to keep both rates in line.
What’s the new rate?
Beginning in the 2021/2022 financial year, the single-rate FBT is now 63.93%. The short form alternate rate has also increased, to 49.25%. You can read about FBT rates in more detail here on the Inland Revenue website.
What will this mean for your business?
The new FBT rate will have an impact if you provide perks for any of your employees (including yourselves as a shareholder employees).
These might include a car they can drive for personal use, or personal travel, or a gym membership, for instance. Deductible entertainment expenses are also subject to FBT – vouchers for hitting sales targets, for instance. Low-interest loans and some types of contributions to funds or insurance policies may also be liable for FBT.
Paying tax on these fringe benefits may now come with a higher tax cost for your business, so this is a great time to review your employee perks. Don’t worry, we’re here to help.
If your business provides any perks to team members, give us a call or send us an email. We can help you understand the new costs of those perks in the upcoming tax year and explain how the different options might work for your company.
Chris Lynch, CA
Ph: 09 366 6008