Crucial Update on Fringe Benefit Tax (FBT) Compliance
30 Oct 2024
It is Q2 FBT time and as we mark over 40 years since the establishment of FBT, it’s clear that the workforce has evolved significantly, particularly with the rise of remote work and changes in vehicle usage. Yet, the FBT rules have largely remained static.
Inland Revenue has recently released draft guidance (https://www.taxtechnical.ird.govt.nz/consultations/2024/pub00453) to clarify how current FBT rules apply to home-to-work travel. This update is essential, especially since any potential changes may still be years away.
Here are some key takeaways from the draft guidance:
- Home-to-work travel is generally considered private. Unless a statutory exemption applies (like the work-related vehicle exemption), this travel can trigger FBT for the employee.
- Four key exceptions to FBT on home-to-work travel have been established:
- Necessary transportation of essential work equipment.
- Itinerant work requiring travel as part of job duties.
- Emergency response from home where responsibility starts before leaving.
- Having a home that qualifies as a workplace, which must meet specific criteria. - The exemptions are not easy to meet. For instance:
- Equipment must genuinely necessitate a vehicle for transport due to its size or sensitivity.
- Just working from home doesn’t automatically create a workplace exemption.
- Significant business-related activities must occur at home for it to qualify as a workplace.
With Inland Revenue intensifying its focus on compliance, now is the perfect time for employers to review their FBT practices. Ensuring adherence to these rules and understanding the nuances of the exemptions is crucial.
The Andersen tax advisory team are practical and solutions driven. Have a chat with the team (info@nz.andersen.com) today and discover the Andersen difference.
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