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Income Tax Act 2007

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

RD 61: Small business option

You could also call this:

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

You can choose to pay your Fringe Benefit Tax (FBT) once a year if you’re a small business. This applies if you paid less than $1,000,000 in tax for your employees’ income and superannuation in the previous tax year, or if you didn’t have any employees.

If you want to use this option, you need to tell the tax office by 30 June of the tax year, or by the end of the first quarter you start employing people.

When you choose this option, you can pay your FBT in one of two ways:

  1. You can pay 63.93% of the value of the fringe benefits you’ve given.
  2. You can work out your FBT using the methods described in sections RD 50 and RD 53.

If you pick the first way but later decide you’d rather use the second way, you can ask the tax office to change it. You’ll need to give them the information they need to do the calculation.

For this yearly payment, the tax year is treated as if it were split into four parts.

If you have more than one business or if you close one business and start another, you need to add up all the tax from all your businesses when working out if you can use this 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=DLM1520131.

Topics:
Money and consumer rights > Taxes
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RD 60: Close company option, or

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

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RD 62: Changes in payment periods, or

“How and when you can change your FBT payment schedule”

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

RD 61Small business option

  1. This section applies when an employer provides a fringe benefit to an employee who is not a shareholder-employee in a tax year if, for the preceding tax 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 were no more than $1,000,000; or
    1. the employer did not employ any employees.

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

      2. 30 June in the relevant tax year; or
        1. the last day of the quarter in which the employer first starts employing employees, if subsection (1)(b) applies.

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

          2. at the rate of 63.93% of the taxable value of a fringe benefit; or
            1. by calculating for the relevant tax 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. For the purposes of subsection (3), the tax year is treated as if it were 4 consecutive quarters.

              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 61(1)(a): substituted (with effect on 1 April 2008), on , by section 518(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
              • Section RD 61(1)(a): amended, on (applying for the 2017–18 and later income years), by section 94(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
              • Section RD 61(2): amended, on , by section 60(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
              • Section RD 61(3)(a): amended, on , by section 13 (and see section 3 for application) of the Taxation (Income Tax Rate and Other Amendments) Act 2020 (2020 No 65).
              • Section RD 61(3)(b): amended (with effect on 1 April 2021), on , by section 157 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
              • Section RD 61(6): amended (with effect on 1 April 2008), on , by section 518(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
              • Section RD 61 list of defined terms ask: inserted, on , by section 60(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
              • Section RD 61 list of defined terms employer's superannuation cash contribution: inserted (with effect on 1 April 2008), on , by section 518(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
              • Section RD 61 list of defined terms inform: inserted, on , by section 60(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).