Update on salary trade-off reforms
On 3 October 2012, Revenue Minister Peter Dunne announced that final decisions on the issues paper “Recognising salary trade-offs as income” had been made. The original proposals in that document would have had extremely wide consequences with a particular impact on employers (see our article from the June Tax Alert). As a result of submissions received, the government has narrowed the proposals releasing some broad information as follows:
- Car parks – the current on-premises exemption from FBT applying to car parks will be removed and instead there will be new specific FBT rules for car parks. The new FBT rules will predominantly target car parks provided to employees in the Auckland and Wellington CBDs. FBT will not be payable where a car park is used by a work vehicle (an employer owned or employee owned vehicle that is used for work purposes throughout the day), is used for late night shifts or is a disabled car park. Standard values will apply when the car park is not provided through a commercial operator.
There is some detail still missing in this release but the assumption from this statement is that car parks in areas other than Auckland and Wellington CBDs may also be taxed where there is an explicit salary trade-off or it is provided by a 3rd party commercial car park operator, but this remains to be seen.
- Charities – the current FBT treatment for charitable organisations will be retained, except the FBT exemption for employees of charitable organisations will no longer extend to vouchers.
- Social assistance – explicit salary trade-offs involving vehicles, car parks and vouchers will be included in the definition of income thereby reducing social assistance entitlements.
At least the government has seen sense on some aspects scaling back the proposals quite a bit which hopefully will reduce the compliance aspects of the original proposals. However we cautiously await the detail as to exactly how these rules will work. A tax bill containing the detail is expected to be released in mid-November 2012 and we will report more fully at that time.
Tax Alert November 2012 Contents:
- The binding rulings process – the price of certainty
- New Zealand’s foreign trust rules – legitimate tax avoidance?
- Penny & Hooper - extended timeframe for voluntary disclosure concession
- Inland Revenue’s approach to time of supply has far reaching implications for GST registered persons
- The most significant case in Australia about the definition of “Supply”
- NZ to negotiate intergovernmental agreement on FATCA
- Upcoming Dbrief on Australian transfer pricing reform
- Bill passes its third reading