Fringe benefit tax, sometimes referred to as perks tax, was introduced to prevent minimisation of tax by structuring arrangements so that benefits rather than wages were provided. At a conceptual level the intention is to result in the same tax outcome whether you are provided cash or a benefit.
The regime provides a risk error when under IRD audit as benefits are less obvious to pick up and so can be missed. Unfortunately, this means when they are uncovered it can be a rather uncomfortable shock as the numbers can get quite large, quite quickly.
The regime is also complicated as there are several exceptions and exclusions, with exceptions and exclusions to the exceptions and exclusions. This are also often misunderstood. A classic example being that there is no FBT on a Ute as it is a work-related vehicle. While there is a partial exclusion for work-related vehicles, there needs to be significantly more than simply being a Ute.
Another area where some confusion can often arise is the exclusion for benefits relating to Health and Safety. One of the key requirements of this exclusion is that it must be aimed at managing risks to health and safety in the workplace as provided under the Health and Safety at Work Act 2015. This often means that things like providing a gym membership, while promoting health, will not meet the requirements of this exemption.
IRD earlier this week published QB 26/02 which provides the Commissioner’s view on this exemption and includes a guide at the end of common benefits related to Health and Safety. It is important to note that this only looks at the specific Health and Safety exclusion. If for example the Gym was on the premises, another exclusion could apply.
If you want to know more about your FBT risks or are interested in reviewing your position, please let your regular contact at Polson Higgs know and we can go through this with you.