FBT discussion document released

A government discussion document released today invites comment on proposed changes aimed at making fringe benefit tax more consistent and more equitable and reducing the associated compliance costs. The proposals have emerged from the recent government review of FBT, the first major review of the tax since it was introduced, in 1985. The proposals cover work-related motor vehicles, car parks, exemptions, business tools such as cell phones and laptop computers, the treatment of minor fringe benefits, and other issues. For more information see the government's media statement and the discussion document, "Streamlining the taxation of fringe benefits".

Hon Dr Michael Cullen
Minister of Revenue

MEDIA STATEMENT

FBT on company-owned cars to be lowered

The government will reduce Fringe Benefit Tax on the private use of company-owned cars by reducing the rate used to value the vehicles from 24 per cent to 20 per cent of cost, Revenue Minister Michael Cullen said today.

"We will also raise the threshold at which FBT is paid on minor benefits, from $75 to $200 per quarter per employee and from $450 to $2000 per quarter for the employer," Dr Cullen said, "and exempt employer-owned work tools, for example laptops and cell phones."

These proposals are in a government discussion document released today and are part of a suite of moves to make the application of FBT more consistent, fairer and cheaper to comply with. The package will affect different businesses differently, resulting in savings for many but increased costs for some and will cost the government an estimated $10 million a year in forgone revenue.

Because around two-thirds of the FBT take comes from motor vehicles, many of the recommendations relate to the tax treatment of cars. Other vehicle-related amendments under consideration are:

allowing employers to elect the start time for their day for the purposes of calculating FBT to prevent private use of the vehicle within a 24-hour period being treated as two days' use;
allowing employers the option of calculating the FBT on the vehicle on the vehicle's lower depreciated value rather than its cost, the equivalent rate being 36 per cent;
bringing leased vehicles into alignment with company-owned vehicles to remove the incentive to lease;
removing the inequities in the current treatment of car parks, where some are taxed and others are not. FBT would be applied more consistently to car parks but would largely be limited to central business areas, and hospitals, schools and charities would be exempted. Options as to the simplest way to achieve this are outlined in the discussion document.

The closing date for submissions is 27 February 2004. The discussion document "Streamlining the taxation of fringe benefits" is on www.taxpolicy.ird.govt.nz and www.treasury.govt.nz.

Contact: Patricia Herbert [press secretary] 04-471-9412 or 021-270-9013. E-mail [email protected]
Technical inquiries to Helen Mackenzie [tax advisor, Dr Cullen's office] 471-9728