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Income Tax Act 2007

General collection rules - Employment-related taxes - Attributing fringe benefits to employees

RD 51: Calculation of all-inclusive pay

You could also call this:

“How to work out an employee's total pay including benefits”

This section explains how to calculate all-inclusive pay for employees when attributing fringe benefits. You use a formula: cash pay minus tax on cash pay plus the taxable value of all fringe benefits.

For major shareholders, cash pay includes dividends and interest from their employer or related employers. The tax on cash pay is calculated using the basic income tax rate, assuming the cash pay is their only taxable income. The taxable value of fringe benefits includes benefits given to the employee and to people associated with them.

For other employees, cash pay is what they get from their employer or related employers in the tax year. The tax calculation is similar to major shareholders. The taxable value of fringe benefits only includes benefits given directly to the employee.

If you’re a shareholder-employee, some of your pay might be treated as if you got it in the next income year.

The section also defines ‘pay’ to include various types of income like salary, wages, and other payments. A ‘related employer’ means a branch or division of an employer, or someone associated with the employer.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520091.

Topics:
Money and consumer rights > Taxes
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RD 50: Employer’s liability for attributed benefits, or

“Employers must pay tax on fringe benefits given to employees”

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“Calculating fringe benefits tax when employer lacks employee information”

Part R General collection rules
Employment-related taxes: Attributing fringe benefits to employees

RD 51Calculation of all-inclusive pay

  1. This section applies to determine the amount of an employee’s all-inclusive pay for the purposes of section RD 50.

  2. The amount of an employee’s all-inclusive pay is calculated using the formula—

    cash pay − tax on cash pay + taxable value of all fringe benefits.

    Where:

    • If the employee is a major shareholder, the items in the formula are—

    • cash pay is the cash pay of the employee for the income year in which the fringe benefit is attributed that is paid to the employee by the employer or a related employer, and includes—
      1. a dividend and interest derived by the employee from their employer; and
        1. a dividend and interest derived by the employee from a related employer:
        2. tax on cash pay is the tax on the cash pay of the employee calculated using the basic rate of income tax set out in schedule 1, part A, clause 1 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits),—
          1. treating the cash pay as if it were the only taxable income of the employee:
            2. taxable value of all fringe benefits is—
              1. the taxable value of all fringe benefits attributed to the employee in the tax year; and
                1. the taxable value of all fringe benefits attributed to a person associated with the employee in the income year if the person does not receive the fringe benefits as an employee of the employer.

                2. If the employee is not a major shareholder, the items in the formula are—

                3. cash pay is the cash pay of the employee for the tax year in which the fringe benefit is attributed that is paid to the employee by the employer or a related employer:
                  1. tax on cash pay is the tax on the cash pay of the employee calculated using the basic rate of income tax set out in schedule 1, part A, clause 1,—
                    1. treating the cash pay as if it were the only taxable income of the employee:
                      2. taxable value of all fringe benefits is the taxable value of all fringe benefits attributed to the employee in the tax year.

                        1. In this section, the cash pay of a shareholder-employee who derives an amount of pay referred to in paragraph (b) or (c) of the definition of pay in subsection (6) is treated as derived in the income year following the income year in which it was received or attributed.

                        2. In this section,—

                          pay means—

                          1. salary or wages; and
                            1. income, other than from a PAYE income payment, to which section RD 3B or RD 3C applies; and
                              1. an amount attributed under section GB 29 (Attribution rule: calculation); and
                                1. an extra pay; and
                                  1. a schedular payment

                                    related employer means a branch or division of an employer, or a person associated with the employer.

                                    Compare
                                    Notes
                                    • Section RD 51(3)(a): amended (with effect on 1 April 2008), on , by section 515 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                    • Section RD 51(3)(b): amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                    • Section RD 51(3)(b)(i): amended (with effect from 1 April 2008), on , by section 43(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
                                    • Section RD 51(3)(b)(ii): repealed, on , by section 43(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
                                    • Section RD 51(4)(b)(i): amended (with effect from 1 April 2008), on , by section 43(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
                                    • Section RD 51(4)(b)(ii): repealed, on , by section 43(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
                                    • Section RD 51(6) pay paragraph (b): replaced, on (with effect on 30 March 2017), by section 212 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).