Inland Revenue have released an update to the FBT guide. The update covers the FBT rate changes from the 2010 Budget. These changes were needed due to the extensive impact oft the changes on FBT rates in 2011, 2012 and future years.
FBT guide update in short
Income tax and GST rate changes came into effect on 1 October 2010. This has a major impact on FBT rates, thresholds and calculations.
FBT rates for 2011 are complicated. Blended income tax rates are needed for 2011 due to the mid year headline rate changes. As such FBT rates for attribution are also blended with a shift in thresholds. Quarterly FBT rates for the 2011 FBT year are split between pre and post 1 October 2010 meaning the 2011 Q3 rate is a stand alone rate.
FBT rates for 2012 (and following years) are back to normal (i.e. not blended rates), but are based on the new income tax rates. Rate thresholds have changed in each year just to complicate things.
We have outlined below some of the changes to the FBT guide (IR409). We were hoping for a broader update of the guide at the same time as some of the explanations can be a little confusing. In particular, FBT on pooled motor vehicles, which seems only to cover what happens in quarters one to three, doesn’t seem to strictly follow how the legislation works.
FBT guide updated for the new FBT rates
- 2010 FBT alternate rates (found on page 3 of the FBT guide)
- 2011 FBT alternate rates (found on page 43 of the FBT guide – buried at the back)
- 2012 FBT alternate rates (found on page 3 of the FBT guide)
The FBT guide is only guidance
While the FBT guide is useful (although a little confusing at times) the legislation is actually a better source of guidance. Firstly its the law. Secondly, its actually pretty easy to read and understanding it will help you prepare and review returns and discuss issues with your tax adviser and Inland Revenue.