2022 FBT Rates are Skyrocketing
New FBT Rates
The FBT rate changes came into effect on 1 April 2021:
- The single rate has moved from 49.25% to 63.93%;
- The alternate rate has increased from 43% to 49.25%;
- The pooling rate moved from 42.86% to 49.25%.
The Impact Is a 30% Increase in FBT
Inland Revenue has advised that around 90% of taxpayers currently use the single rate to calculate their FBT. If those same taxpayers continue to use the single rate for 2021/2022 tax year, they will see a significant 30% increase in their FBT liability.
How to Minimise the Increase
Employers can perform an FBT attribution calculation in the final FBT quarter (1 January to 31 March each year). This means benefits provided over the course of the year are taxed at each employee’s marginal tax rates per their income level.
It will be more important for taxpayers to use attribution for the 2021-22 FBT year in order to keep FBT cost increases to a minimum. This is especially the case where there are a large number of employees earning under the top tax rate threshold of $180,000 p.a.
Example:
Please check out the table below for a simple illustration of how the tax liability differs between single rate and attribution in 2021 and in 2022.
| Employee | Benefit | Pay | Benefit Value | 2021 Single Rate | 2022 Single Rate | 2022 Attribution |
|---|---|---|---|---|---|---|
| John | Motor vehicle | $150,000 | $8,000 | $3,940 | $5,114 | $3,940 |
| Jane | Insurance | $100,000 | $3,000 | $1,478 | $1,918 | $1,478 |
| Jimmy | Gift | $60,000 | $400 | $197 | $256 | $171 |
| Totals | $5,615 | $7,288 | $5,589 |
When Should I Start Looking Into This?
Now. In order to be able to perform your attribution calculation in the final quarter of 2021/2022, you need to ensure you have the right data available. This includes knowing which employees have received which benefits and the corresponding value. Further, there are significant cash flow benefits in having the confidence to lock in the alternate rate for the first 3 quarters of the FBT year.
How to Simplify the FBT Attribution Calculation
Contact us! FBT calculation software like Taxlab is available to make FBT compliance much easier and more robust while helping you save tax costs. We would be happy to organise a demo for you. Otherwise, you can also get in touch with your tax adviser to evaluate your options based on your requirements and resources.
FBT Resources
Online
- Inland Revenue: Fringe benefit tax rates
- Baker Tilly Staples Rodway: The new 39% tax rate
- Deloitte: The tax cost of your fringe benefits is about to increase
- Deloitte: Key things you need to know under the 39% rate
- KPMG: 39% personal tax rate legislation introduced
Webinars
- PwC & Taxlab: 2021 FBT Update, Thursday 17 June 2pm-3pm