MEDIA RELEASE (NZ)

Chartered Accountants Australia and New Zealand (CA ANZ) is calling for progress on Fringe Benefit Tax (FBT) proposed reform, noting its absence from the annual tax bill - Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill.

“Chartered Accountants ANZ, Inland Revenue and taxpayers around the country agree that FBT is outdated, overly complex, and imposes unnecessary compliance costs on employers,” says John Cuthbertson FCA, CA ANZ Tax Leader.

In April, Inland Revenue conducted an extensive public consultation on proposed changes to FBT, to address concerns raised by businesses and organisations.

“The proposed FBT reforms for motor vehicles and other benefits aims to lower compliance costs for businesses while preserving the integrity of the overall tax system. CA ANZ has long advocated for FBT reform and would like to see the proposed changes proceed.

“Before Fringe Benefit Tax, employers boosted remuneration by providing non-cash benefits, that weren’t subject to PAYE.

“Fast forward to today, and the current FBT system is widely misunderstood, particularly in relation to vehicle use, and lack of compliance threatens our greater tax system.”

Key features of the FBT proposals include:

• Simplification and compliance cost reduction: The proposed ‘set and forget’ approach for motor vehicles would eliminate  the need to track daily private use, while changes to other benefits would remove outdated caps and focus on genuine instances of in-kind remuneration – not small gifts to acknowledge life events or bereavement.
• Revenue neutrality: The reforms are intended to be fiscally neutral across all taxpayers. “Simplification does not mean a reduction in FBT payable,” said John Cuthbertson FCA. “Some employers may pay more, others less, but overall the tax take should remain stable or potentially increase with enhanced compliance.”
• Good for the planet: There is no incentive to buy a ute or van, as opposed to a smaller vehicle, under the proposed ‘categories of vehicle use’ approach. Employers would be able to right size vehicle purchases to their intended use.

A key area of confusion and non-compliance is around work-related vehicles.

“There is currently an entrenched misconception that no FBT is payable if the motor vehicle has certain characteristics – for example if it is not a car designed exclusively or mainly to carry people,” says Mr Cuthbertson.

“Many taxpayers currently claiming the exemption are not compliant and should be paying FBT under the existing rules. This impacts the relative starting point in relation to the assertion that more FBT will be payable.

“The issue here is that many employers currently claiming the exemption do not meet the necessary criteria. This misuse distorts the baseline and should not be used to argue against reform.

“The proposals in the officials’ issue paper are simple and open to refinement based on submissions. As proposed, employers with work vehicles will select one of three categories. If the vehicle is solely for business use, the FBT will be 0 per cent.

“If it’s mainly business use with restricted private use, then the FBT benefit component is 35 per cent, and if it’s mainly for employees unrestricted, private use, then the whole value (100 per cent) of the vehicle will be subject to FBT.

“These reforms are well thought through and reflect extensive consultation. They would make FBT easier to understand and comply with and strengthen its role in the tax system. We urge the Government to move the proposals forward as soon as possible,” concluded Mr Cuthbertson.