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Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: specific

GB 31: FBT arrangements: general

You could also call this:

“Rules for dealing with arrangements that try to avoid fringe benefit tax”

You need to know about a rule that deals with fringe benefit tax (FBT) arrangements. This rule applies when two or more people make a plan that tries to get around the FBT rules. If the plan’s main purpose is to avoid FBT, and it’s not just a side effect, the rule kicks in.

When this happens, the tax office (called the Commissioner) can decide to treat things differently. They can say that one person in the plan is the employer, and another is the employee, even if that’s not how it really is. They can also say that a benefit was given by the ‘employer’ to the ‘employee’ as part of their job.

The Commissioner can only do this for benefits that were actually given, or that the ‘employee’ would have gotten, or would likely have gotten, or might be expected to have gotten if the plan hadn’t happened.

There’s also a special rule about cars. The Commissioner can say that the cost of a car is the same as what it would sell for, rather than what it actually cost.

Remember, these rules are there to make sure people don’t try to avoid paying the right amount of FBT.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516985.

Topics:
Money and consumer rights > Taxes
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Part G Avoidance and non-market transactions
Avoidance: specific

GB 31FBT arrangements: general

  1. This section applies when—

  2. 2 or more persons enter into an arrangement; and
    1. a purpose or effect of the arrangement is to defeat the intent and application of any of the FBT rules; and
      1. the purpose or effect is not merely incidental.

        1. For the purposes of the FBT rules, the Commissioner may treat—

        2. a party to the arrangement (the provider) as the employer of a person (the recipient) of whom the Commissioner notifies the provider:
          1. the recipient as the employee of the provider:
            1. a benefit as being provided by the provider to the recipient through the employment of the recipient.

              1. The Commissioner may apply subsection (2)(c) only in the case of a benefit that,—

              2. is in fact provided by the provider to the recipient; or
                1. had the arrangement not occurred, the recipient—
                  1. would have obtained; or
                    1. would in all likelihood have obtained; or
                      1. might be expected to have obtained.

                      2. Schedule 5, clause 4(c) (Fringe benefit values for motor vehicles) may apply to treat the cost of a motor vehicle as equal to its market value.

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                      Notes
                      • Section GB 31 list of defined terms notify: inserted, on , by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).