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Fringe benefit tax changes

29 April 2005 Media Statement

Fringe benefit tax changes

The fringe benefit tax rules will be improved to reduce business compliance costs, Revenue Minister Michael Cullen announced today.

“Under the new rules, to come into effect from 1 April next year, employers will be able to calculate the motor vehicle fringe benefit based on a vehicle’s tax book value as an alternative to using the vehicle’s cost price.

“In recognition of lower real motoring costs since the 1980s, when the rules were introduced, the FBT valuation rate applying to the cost price of a motor vehicle will be reduced from 24 per cent to 20 per cent of the cost. The equivalent tax book value rate will be 36 per cent.

“Also, the FBT treatment of leased vehicles will be aligned with that of owned vehicles, meaning that the fringe benefit from a leased vehicle will be based on its cost or tax book value – rather than its market value, as at present.

“The minimum value thresholds applying to miscellaneous fringe benefits will be raised. The employee minimum value threshold will go up from $75 to $200 per quarter, and the employer threshold will rise from $450 a quarter to $15,000 a year. This will lower compliance costs for businesses by reducing the need to measure and account for FBT for minor benefits. For some it will mean that FBT returns will no longer need to be filed.

“The private use of employer-owned or leased business tools such as cell phones and laptop computers will be exempted from FBT when they are provided to employees primarily for business purposes, as long as they cost no more than $5000 each.

“The change recognises that it is difficult and therefore expensive for employers to monitor and value the private use of these items. For example, when a business provides laptops to employees it will no longer have to worry about FBT liabilities should the computer occasionally be used to play games, Dr Cullen said.

Full information on these and other planned FBT changes will be available when the bill is introduced next month.


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