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Income Tax Act 2007

General collection rules - Employment-related taxes - Value of fringe benefits

RD 40: Goods

You could also call this:

“How your employer values goods given to you as a benefit”

When your employer gives you goods as a benefit, the value of those goods is determined in different ways:

If your employer made the goods, the value is their market value. Market value means the lowest price someone would pay for the same goods in New Zealand at the time you got them.

If your employer bought the goods from someone else, the value is what it cost your employer to buy them. For employers who can claim GST, this includes the GST they paid.

If your employer is part of a group of companies, they can choose either of these ways to work out the value.

However, if the value worked out this way is more than what you would pay if you bought the goods yourself in a normal shop, then the value is what you would pay in the shop. This shop price is based on a normal sale to the public in New Zealand.

For employers who can claim GST and make their own goods, the value includes the GST they would charge when selling the goods.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520045.

Topics:

Money and consumer rights > Taxes

RD 39: Benefits provided by charitable organisations, or

“Tax rules for benefits from charitable organisations”

RD 41: Services, or

“Rules for valuing services given as fringe benefits by employers”

Part R General collection rules
Employment-related taxes: Value of fringe benefits

RD 40Goods

The value of a fringe benefit that an employer provides to an employee in goods is determined as follows:
when the person providing the goods manufactured, produced, or processed them, their market value:
when the person providing the goods otherwise acquired them, or paid for them to be acquired, dealing at arm’s length with the supplier of the goods, the cost of the goods to the person:
if the person providing the goods is a company included in a group of companies, then, as the person chooses, the value of the benefit under either paragraph (a) or (b), applying the provisions as if the group of companies were 1 company.

Despite subsection (1), if the value of the fringe benefit as determined under that subsection would be more than the amount that would have been paid to the employer for the purchase of the goods in a sale described in paragraphs (a) to (d), then the value is treated as that amount. The sale must be—
at retail in the open market in New Zealand; and
freely offered; and
made on ordinary trade terms; and
to a member of the public with whom the employer is at arm’s length.

In this section,—
cost, for a registered person who may claim input tax for the goods, means the GST-inclusive cost of the goods bought or the amount that the person paid for the goods
market value means the lowest price, at the time at which the goods were provided to the employee, for which identical goods were sold by the same person to an arm’s length buyer, whether wholesaler, retailer, or the public, in the open market in New Zealand in a sale freely offered and made on ordinary trade terms
price, for a registered person who may claim input tax for goods that they manufacture, produce, or process, means the GST-inclusive price of those goods to that person.

Compare

2004 No 35 s ND 1J

Notes

Section RD 40(1)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).