MEDIA RELEASE (NZ)

Chartered Accountants Australia and New Zealand (CA ANZ) welcomes proposals for a reimagined, simplified Fringe Benefit Tax (FBT) but warns against expecting lower tax payments.

CA ANZ Tax Leader John Cuthbertson FCA said the current FBT, which is now 40 years old, is complex and burdensome, providing modest tax revenue and lacking universal compliance.

"FBT acts as an integrity measure to ensure that employment remuneration is taxed, whether paid in cash or provided via non-cash benefits. However, its complexity and high compliance burden make it easy to get wrong. It's time for a change,” said Mr Cuthbertson.

"The proposed changes aim to simplify the process and make compliance easier, but the Government could potentially collect more with increased compliance and enforcement. People shouldn’t expect to pay less FBT under the proposed changes."

Inland Revenue has released an issues paper on options for change, inviting comments by 5 May. The focus is on simplifying the taxation of motor vehicles and other benefits to make compliance easier while collecting the same amount of tax.

"There will be winners and losers, especially where past reliance has been placed on exemptions that may disappear," said Cuthbertson.

“Taxation of motor vehicles is potentially the biggest change. There will be a lot less record keeping because you won’t have to track usage on a daily basis.

“Rather, 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.

“Gifts to acknowledge life events, and bereavement, will fall out of the FBT regime, and rightly so, as they’re not meant to replace remuneration.

In a further shake-up, there is also a proposal to do away with a separate entertainment tax and include a pared-back concept within FBT.

"We welcome simplification of the entertainment expense rules, as they’re among the most criticised, outside of FBT. However, we caution against their rushed transfer into the FBT regime, particularly if the changes result in greater taxation, with the removal of a range of exemptions,” concluded Mr Cuthbertson.