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Income Tax Act 2007

General collection rules - Employment-related taxes - Options for payment of FBT

RD 60: Close company option

You could also call this:

“Option for small companies to pay fringe benefit tax annually”

If you own a small company and provide benefits to employees who are also shareholders, you might be able to pay your fringe benefit tax (FBT) once a year instead of every quarter. You can do this if your company meets certain conditions in the previous tax year:

  1. Your company paid less than $1,000,000 in PAYE and superannuation contribution taxes, or
  2. The only benefit you provided was letting shareholder-employees use one or two company vehicles for personal use, or
  3. You didn’t have any employees at all.

If you qualify, you can choose to pay FBT yearly by telling the tax department by the end of the first quarter of the tax year. If you didn’t have employees before, you need to tell them by the end of the quarter when you first hire someone.

When you pay FBT yearly, you can either pay 63.93% of the value of the benefits, or you can calculate the amount using special rules in sections RD 50 and RD 53. If you want to change from the first option to the second, you can ask the tax department, but you’ll need to give them the information they need to do the calculation.

If your tax year doesn’t start at the beginning of a quarter, you’ll need to treat the time between the start of the quarter and the start of your tax year as if it were a full quarter.

If you stop one business and start another, or if you run more than one business at the same time, you need to add up all the PAYE and superannuation contribution taxes from all your businesses when figuring out if you can use this yearly FBT option.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520129.

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Money and consumer rights > Taxes
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RD 59: Alternate rate option, or

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RD 61: Small business option, or

“Pay FBT once a year for small businesses with low employee tax or no employees”

Part R General collection rules
Employment-related taxes: Options for payment of FBT

RD 60Close company option

  1. This section applies in an income year when an employer that is a close company provides a fringe benefit to a shareholder-employee if, in the preceding income year,—

  2. the gross amounts of tax for both PAYE income payments and employer's superannuation cash contributions withheld under section RA 5(1)(a) and (c) (Tax obligations for employment-related taxes) for the tax year, as modified by section RA 20(2) (Amalgamation of companies), were no more than $1,000,000; or
    1. the only benefit provided by the employer was a fringe benefit—
      1. arising under section CX 6(1) (Private use of motor vehicle); and
        1. limited to making available to shareholder-employees 1 vehicle or 2 vehicles for their private use; or
        2. the employer did not employ any employees.

          1. The employer may choose to pay their FBT liability on an income year basis, informing the Commissioner of their decision no later than—

          2. the last day of the first quarter of the relevant income year; or
            1. the last day of the quarter in which the employer first starts employing employees, if subsection (1)(c) applies.

              1. The employer must pay FBT on the taxable value of fringe benefits in the income year in which they make their election and in later income years either—

              2. at the rate of 63.93% of the taxable value of a fringe benefit; or
                1. by calculating for the relevant income year their FBT liability under sections RD 50 and RD 53.

                  1. Despite subsection (3), the employer may ask the Commissioner to replace the FBT liability determined under subsection (3)(a) with a calculation under subsection (3)(b). The employer must provide the information necessary for the calculation.

                  2. If an income year for which an employer chooses to pay FBT on an income year basis does not start on the same day as the first day of a quarter, the employer must treat the period between the first day of the quarter in which the first day of the income year falls and the first day of the income year as if it were a quarter.

                  3. If an employer ceases business and starts a new business, or operates 2 or more businesses at the same time, the total of all amounts of tax withheld under section RA 5(1)(a) and (c) must be aggregated.

                  Compare
                  Notes
                  • Section RD 60(1): substituted, on , by section 18(1) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
                  • Section RD 60(1)(a): substituted (with effect on 1 April 2008), on , by section 517(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section RD 60(1)(a): amended, on (applying for the 2017–18 and later income years), by section 93(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
                  • Section RD 60(1)(a): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 86(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                  • Section RD 60(2): amended, on , by section 59(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                  • Section RD 60(2)(b): amended, on , by section 18(2) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
                  • Section RD 60(3)(a): amended, on , by section 12 (and see section 3 for application) of the Taxation (Income Tax Rate and Other Amendments) Act 2020 (2020 No 65).
                  • Section RD 60(3)(b): amended (with effect on 1 April 2021), on , by section 156(1) (and see section 156(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                  • Section RD 60(6): amended (with effect on 1 April 2008), on , by section 517(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section RD 60 list of defined terms ask: inserted, on , by section 59(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                  • Section RD 60 list of defined terms employer's superannuation cash contribution: inserted (with effect on 1 April 2008), on , by section 517(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section RD 60 list of defined terms employer's superannuation contribution: repealed (with effect on 1 April 2008), on , by section 517(4)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section RD 60 list of defined terms inform: inserted, on , by section 59(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).