Time to review employee perks
Along with a new top tax rate introduced on April 1st, we also had a new top fringe benefit tax rate come into effect.
What is fringe benefit tax?
Fringe benefit tax, or FBT, is a way of taxing employee benefits. It’s designed to ensure people are paying tax on all types of income, including perks. As the top tax rate has increased to 39%, the FBT has also risen, 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 shareholder employees).
This may include a car that can be driven for personal use, personal travel, or a gym membership, for instance. Deductible entertainment expenses are also subject to FBT – vouchers for hitting sales targets, for example. 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. the time to review your employee perks.
What should you do?
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.