Common fringe benefit tax mistakes

Different formulas and calculations are needed to work out a benefit’s taxable value. How your FBT is calculated depends on the types of benefits you provide your employees (ordinary and shareholder employees).

Some errors in working out the taxable value include:

• using the incorrect value to calculate motor vehicle value (such as whether to use cost price or tax book value and when to use the GST inclusive or exclusive value)
• using the incorrect information to work out the days that vehicles are available for private use
• applying employer’s contribution value incorrectly when working out the taxable benefit
• incorrectly applying FBT exemptions, especially for motor vehicles.

For help working out cost price or tax book value and when to use the GST inclusive or exclusive values, refer to the Fringe benefit tax guide - IR409.

Work-related vehicles are only exempt from FBT if they meet certain requirements. This includes double cab utes. It’s important to know what is required for a vehicle to be exempt from FBT.

Utes may be considered work-related as they are dual purpose vehicles, but this does not mean they are automatically exempt from FBT.

Find out more about FBT on motor vehicles.

Employer provided motor vehicles for private use

You may need to consider GST on any benefits provided to employees (ordinary and shareholder employees). This is calculated based on the GST content of the taxable benefit less any GST exempt items.

Some errors include:

• incorrectly accounting for GST on exempt benefits such as loans to employees
• GST being calculated incorrectly based on the GST content of the FBT value, instead of the taxable benefit value
• incorrect GST on fringe benefit adjustments when your company generates mixed use supply.

If an employee makes any payment in return for having a fringe benefit, the payment is deducted when working out the taxable value of the benefit. 

When the employee's contributions are not recorded and applied correctly, it results in the fringe benefit being given an incorrect value.

If you provide fringe benefits to shareholder-employees, these may be treated differently for FBT purposes. Make sure you check which FBT rules apply to the benefits you are providing to shareholder-employees.

Types of fringe benefits

The single flat rate for FBT is 63.93% (not 49.25%). It’s important to know this because if you use the old rate, you might need to do another, more difficult alternate rate calculation. 

For quarterly filers

If you use a rate lower than 63.93% in any of the 1st 3 quarters, you will need to do an alternate rate calculation in the final quarter (ending 31 March). There are several alternate rate options available to suit your needs.

Alternate rate calculations can be complex, so make sure that you understand them or speak with your tax agent before you submit the return.