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Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: specific

GB 32: Benefits provided to employee’s associates

You could also call this:

“Tax rules for benefits given to people connected to employees”

This law is about benefits given to people connected to employees. If you give a benefit to someone close to an employee, it might be treated as if you gave it to the employee directly. This happens when the benefit would be a fringe benefit if given to the employee, and it’s provided by the employer or someone working with the employer.

There are some exceptions to this rule. If the employer is a company and the employee owns part of it, the rule doesn’t apply if the benefit isn’t meant to replace income or avoid tax. Also, if the employer is a special type of company called a look-through company, or a partnership, and the person getting the benefit owns part of the company or is a partner, the rule doesn’t apply.

When this law does apply, the benefit is treated as if it was given to the employee for tax purposes. This means the employer might have to pay fringe benefit tax on it.

There’s a special rule for benefits given to someone who is connected to both an employee and a shareholder. In this case, Section CX 18 helps decide if it should be treated as a fringe benefit or as a dividend.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516989.

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

GB 32Benefits provided to employee’s associates

  1. This section applies when—

  2. a benefit is provided to a person who is associated with an employee of an employer; and
    1. the benefit would be a fringe benefit if provided to the employee; and
      1. the benefit is provided either by the employer or by another person under an arrangement with the employer for providing the benefit; and
        1. the exemptions in subsections (2) and (2B) do not apply.

          1. Subsection (3) does not apply when—

          2. the benefit is provided by an employer that is a company; and
            1. the employee is a shareholder in the company; and
              1. the person associated with the employee is a company; and
                1. the benefit is not provided under an arrangement that has a purpose of providing the benefit either—
                  1. in place of employment income; or
                    1. free from fringe benefit tax.

                    2. Subsection (3) does not apply when—

                    3. the benefit is provided by an employer that is—
                      1. a look-through company (an LTC):
                        1. a partnership or limited partnership; and
                        2. the person associated with the employee, described in subsection (1)(a), is—
                          1. an owner of the relevant LTC:
                            1. a partner of the relevant partnership or limited partnership.

                            2. For the purposes of the FBT rules, the benefit is treated as provided by the employer to the employee.

                            3. Section CX 18 (Benefits provided to associates of both employees and shareholders) applies to determine when a benefit provided to an associate of both an employee and a shareholder is treated as a fringe benefit and not a dividend.

                            Compare
                            Notes
                            • Section GB 32(1)(d): amended, on , by section 74(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                            • Section GB 32(2B) heading: inserted, on , by section 74(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                            • Section GB 32(2B): inserted, on , by section 74(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                            • Section GB 32(2B)(a)(i): replaced (with effect on 2 November 2012), on , by section 79 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                            • Section GB 32 list of defined terms limited partnership: inserted, on , by section 74(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                            • Section GB 32 list of defined terms LTC: inserted, on , by section 74(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                            • Section GB 32 list of defined terms partner: inserted, on , by section 74(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                            • Section GB 32 list of defined terms partnership: inserted, on , by section 74(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).