Fringe Benefit Tax (FBT) is the tax applied to non-cash benefits employers provide their team members with, such as low-interest loans, motor vehicles, employer contributions to benefit funds/schemes/insurance, and free or discounted products and services. It is a way to ensure that all forms of employee remuneration are taxed.
As a general rule, benefits provided to staff “on the employer’s premises” are exempt from FBT, such as car parks and on-premise childcare. Current rules surrounding car park exemption from FBT are restrictive, stating that on-premise car parks must be owned or leased by the employer, or be located on licensed premises. This naturally excludes from exemption car parks under a license agreement in a commercial parking building.
However, a proposed IRD ruling now plans to expand the definition of “on the employer’s premises” to include car parks paid for by the employer and used by an employee but located anywhere in a parking building, i.e. it will no longer have to be a specified parking space. Therefore if an employer has the “substantially exclusive” right to use the car park, it will be exempt from FBT.
At this stage the ruling will be effective from the date the ruling is adopted. Once this is in place, the IRD has also committed to reviewing with employers possible over-payments of FBT for reassessment.