University Taxation Module: Fringe Benefit Tax Assignment

This document provides a comprehensive solution to a Fringe Benefit Tax (FBT) assignment, addressing key aspects of FBT in New Zealand. It begins by defining FBT liability under section CX 36, focusing on the availability of motor vehicles for private use and referencing the case of “CIR v Yes Accounting Service Ltd.” The solution explains how employers attribute fringe benefits and the implications of employee contributions. It then explores the advantages of fringe benefits for employers, emphasizing tax deductions and attracting talent. The document outlines areas where employers can gain tax advantages, such as medical insurance, company cars, and educational assistance. It also includes references to relevant taxation law and resources, providing a complete understanding of FBT principles and their practical application. The assignment also covers the historical background of FBT and its objectives.

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Answer to question (A):.............................................................................................................2
Answer to question (B):.............................................................................................................2
References:.................................................................................................................................4

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Answer to question (A):
The liability for “fringe benefit tax” arises under the section CX 36 if the motor
vehicle is available with the employee for their private usage. As noted in the case of “CIR v
Yes Accounting Service Ltd” the law court held that the availability of the private usage of
the car do not happen till the owner gives the employee with the practical and unconditional
usage of vehicle.
The parliament has legislated for liability to fringe benefit tax on the basis that the
employer should attribute the “fringe benefit” to the employee at the time of calculating the
fringe benefit tax liability under the section RD 50 (Prebble 2015). The attribution of fringe
benefit is only when providing an employee with the benefit that has the taxable value of
greater than $1,000 in a financial year.
The problems that may be created for employers is the treatment of employee
contribution towards the fringe benefits. The chargeable value of the fringe benefits are
lowered till the amount the contribution is made by the employee for benefit. Even though it
leads to reduction in the fringe benefit liability to nil, the employers are yet needed to file the
nil FBT as the benefits have been provided. Apart from this the employer also faces the
problem of income production insurance which is not subjected to fringe benefit tax. The
contribution of employer to income protection insurance premiums are not considered fringe
benefit since any type of policy payment to the employees as the result of claim will be
considered taxable income to employee. Contributions are deductible for the employer since
it is an employee related cost.
Answer to question (B):
In the business circles the employers cannot regularly invite the best expert help
through wages only. Hence the ascent of “fringe benefit” valued employee benefits simply

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seals the deal amid the “employer and employee”. For an employer providing high salary
cannot be considered sufficient. To bring the best talent on board important factors such as
lucrative benefits in the form of health care and company owned vehicle are some of the
other fringe benefit that must be added to the employee’s financial package (Veal, Turner and
Macalister 2015). Most importantly the cost involved in offering fringe benefit to the
employees is completely deductible to the employer since the fringe benefit tax is the
deductible expenditure to the employer.
The employers can obtain tax advantage in the following areas;
a. Medical and dental insurance
b. Car fringe benefit
c. Educational assistance
d. Vacation and vacation payment
e. Sick fringe benefit
f. Free meals, drinks and snacks
g. Permission of keeping the frequent flyer points and card rewards earned on the
business plan that can be used as private trips.
Above stated are some of the areas where the employer can obtain a tax advantage
because the fringe benefit is excluded from income for those employees that receives it. The
fringe benefit tax is allowed for tax deduction for an employer.

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References:
Prebble, Q.C., 2015. New Zealand Taxation and Taxation Law. Issues on Taxation in the
South Pacific/Regards sur la Fiscalité dans le Pacifique Sud Comparative Law Journal of the
Pacific Hors Série XVIII (2015), 99.
Veal, J., Turner, T. and Macalister, C., 2015. Staples tax guide 2015. Thomson Reuters.