30 Nov Festive Season I Fringe Benefits
Ready for the festive season?
The Christmas and New Year period is just around the corner, and for many of us, that means a well-deserved break! Before you switch on the out-of-office and head to the beach, it’s worth taking a few steps to make sure everything runs smoothly while you’re away.
Start by checking your cash flow – the next couple of months can be tricky with slower payments and extra holiday costs. If you think things might get tight, send out invoices early and follow up on any overdue accounts now. Going to need a little more cash? Ask the bank BEFORE you need it (as in, now).
Something that ALWAYS slips, the 15th of Jan tax payments for GST and income tax (we’ll be sending out reminders about these this month). If you do have staff, public holidays and staff leave can make things a bit more complicated, so double-check entitlements and make sure everything is scheduled before you close.
Speaking of closing, let your customers and suppliers know your holiday hours and set up an auto-reply for emails.
On that note, we’ll be shutting up shop on the 22nd of December and back on the 12th of January.
Fringe Benefits
Changes are being proposed for Fringe Benefit Tax (FBT) and if you have a business vehicle, this will likely affect you. Inland Revenue has signalled an update to the FBT rules with the stated goal of ‘reducing tax compliance time for employers’. We think it is also about ‘increasing compliance from employers’ as it’s well known that few businesses comply with the current FBT rules. The proposals focus particularly on the treatment of work vehicles, aiming to simplify the existing rules.
A significant proposal is the removal of the current “work-related vehicle” exemption. This exemption applies to certain vehicles, like utes and vans, and allows for some private use (such as home-to-work travel) without FBT, provided specific conditions are met, such as displaying a company logo. The new proposal would replace this system. Instead, FBT would be determined by how a vehicle is used in practice, rather than its type. This new approach categorises vehicles into three groups:
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Category 1: Unrestricted private use (100% FBT applies)
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Category 2: Predominantly business use (35% FBT applies)
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Category 3: Business use only (no FBT applies)
This proposed system is intended to be a more ‘practical’ framework for FBT on vehicles. In practice, we think it’s going to be very difficult for small business owners to argue that no business use applies, and we’re yet to get our heads around where the line is between predominant business use and unrestricted private use.
One potential outcome is a reduced need for detailed logbooks to prove a vehicle’s unavailability for private use. It also removes the distinction between vehicle types, such as cars and utes, for FBT purposes. These rules aren’t yet in place so there may yet be some tweaks. But given the effort that IRD has put in over the course of this year, I think we can read between the lines that a version of these changes WILL happen.
Have a great December, Christmas and New Year!
