Employee perks could be axed after Government tax change

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Forums › Finance and wealth management › Employee perks could be axed after Government tax change

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#2620080 11-Dec-2020 12:47

BlinkyBill:
tripper1000:

... In trying to stick-it to the man at the top, they kicking the man at the bottom in the teeth.

...

I don’t understand this - how are they “kicking the man at the bottom in the teeth”?

Easiest place to hit if he's at the bottom. The man at the top gets his toes smashed instead.

antonknee

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#2620093 11-Dec-2020 13:29

tripper1000:

Nice, nice, that's really well thought out, like most of their other policy. In trying to stick-it to the man at the top, they kicking the man at the bottom in the teeth. Well done! I was hoping that with the Greens being being side-lined at the last election we'd see less of this nonsense.

I wonder if they're hoping to stimulate job creation for administrators and accountants by making it so expensive to pay the flat rate, that companies start calculating individual rates. There has been a bit of this type of job creation in the safety and building industry.

Sticking it to the man at the top? By slightly increasing his tax rate... sure thing. Kicking the man at the bottom in the teeth by taxing perks to prevent income being hidden... again sure thing.

Such an immature response to what's hardly a massive issue IMO. This will affect few people really.

jonb

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#2620107 11-Dec-2020 13:47

afe66: By friend a surgeon was told not to buy an ev by his accountant and to buy a double cab ute.....

The Ford Ranger tradie rort should definitely be clamped down on. Could be one of the first actions our of the 'climate emergency' to make it more palatable.

tripper1000

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#2620161 11-Dec-2020 15:30

afe66: My friend a surgeon was told not to buy an ev by his accountant and to buy a double cab ute.....

An excellent example of poorly thought out policy that shows the recent declaration of a climate emergency to be nothing more than hot air.

BlinkyBill: I don’t understand this - how are they “kicking the man at the bottom in the teeth”?

frankv: The man at the bottom rarely, if ever, gets perks. So it's completely irrelevant, not a kick in the teeth.

The guy at the bottom will loose his perks first because the boss is still going to get his car of course, but companies will cut perks starting at the bottom and working their way up the ladder.

antonknee: Sticking it to the man at the top? By slightly increasing his tax rate... sure thing. Kicking the man at the bottom in the teeth by taxing perks to prevent income being hidden... again sure thing.

As above. A rise of 29% (49.25% rising by 14.28 points to 63.93%) isn't exactly a "slight" rise. It isn't hidden income if it is being taxed but a tax of 63.93% is a whole lot of motivation to start hiding income! When an employee is on a tax rate of ~30% it is hardly fair to tax their perks at 63.93%.

tripper1000

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#2620186 11-Dec-2020 15:51

MikeB4: The debt created by Covid has to be serviced. This is better than an across the board PAYE tax increase. Yes I will be hit as my wife is in the high income bracket and there are a couple of small perks but Covid hit hard and the ferryman is wanting payment.

The fact that a bill has to be paid is no justification to single out a particular group at any time but particularly so when the debt was incurred for the benefit of all. That is banana-republic thinking.

If you read about labours tax rate changes, deregulation and fire-sale of state owned assets in the early 80's, you'll see that they had concluded that taxing upper income brackets at rates north of 60% was not working and was actually being counter productive. The conclusion was everyone had to pay their fair share of tax - you couldn't lump some people with a grossly disproportionate portion. With today's global economy, it is much easier to shift jobs off shore to softer tax regimes so the risks of a net loss in tax take is greater now than ever before. We see this classically with call centres, but it is also happening with higher tax bracket jobs such as marketing and executive management - how many companies have closed NZ head offices and manage the place out on Au, the US or else where? If you want to reverse this trend, raising the upper tax brackets is not the way to do it.

BlinkyBill

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#2620191 11-Dec-2020 16:00

I’ve got a feeling you don’t know how FBT works.

Firstly, it’s the Employer who pays the tax, not the Employee. If someone gets a benefit that is FBT-payable, it won’t affect his/her income since it’s the employer who pays the tax.

Secondly, it’s hard to see why a surgeon would seek out a vehicle as an FBT-payable benefit - surgeons work in a very few and standard locations, these would be their normal places of work and therefore not subject to expense recovery. It would therefore render their entire vehicle usage subject to FBT, at a pretty high rate of tax - it would be more efficient cost-wise to just buy a vehicle. So unless AFE’s example is veterinary surgeon that makes no sense. And if she IS a veterinary surgeon then a Ute makes more sense.

Lastly, if you get a benefit today it will be listed in the employment agreement. The benefit can’t be arbitrarily removed - it would need to be cashed-out to reflect the reduction in benefit should the employer consider the FBT tax no longer worthwhile. Hardly a ‘kick in the teeth’.

nztim

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#2620195 11-Dec-2020 16:06

This is what happens when tax laws are passed without thinking about the consequences of each individual situation

While in principle I believe in 39% for those on over $180k the unintended consequences are companies paying more tax that required on FBT or the accounting fees to address it on a person by person basis

Any views expressed on these forums are my own and don't necessarily reflect those of my employer.

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sen8or

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#2620196 11-Dec-2020 16:07

The whole "Ford Ranger - tradie vehicle" being exempt from FBT is factually incorrect.

They "can" be exempt from GST if classified as a workplace vehicle. For this exemption to apply, they must be at least 50% load bearing (so here the ranger does qualify), they must be signwritten in the company's usual logo / decal and this can't be easily removable (not magnetic signs) and there must be a policy and written confirmation that they are not available for personal use, they are business use only with travel incidental to/from the place of work being ok. In addition to the letter, "random checks" at least quarterly are to be documented so that confirmation of the company policy is held.

granted, the above is IRD tax rules, how many businesses (particularly 1 man band tradies) abide by the rules? Who knows

So this means, the ute you see at the rugby club / golf club on the weekend is (most likely) breaking the rules if the company isn't paying FBT for personal use.

Where this will hit "average joe worker" is things like workplace medical insurance, staff discounts on purchasing or other "small" benefits all of a sudden increasing in cost that will make some companies think twice about providing the benefit.

BlinkyBill

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#2620202 11-Dec-2020 16:13

sen8or:

...

So this means, the ute you see at the rugby club / golf club on the weekend is (most likely) breaking the rules if the company isn't paying FBT for personal use.

Where this will hit "average joe worker" is things like workplace medical insurance, staff discounts on purchasing or other "small" benefits all of a sudden increasing in cost that will make some companies think twice about providing the benefit.

This is correct. I would further suggest that the actual additional FBT on the "small" benefits is, to be frank, not worth the hassle of changing employment contracts and cashing out, and therefore the employer will just suck it up. Or they will eliminate it in whole, as happened when FBT first came in, and just be done with it.

I think the hysteria is founded on a lack of experience and understanding of FBT and it's actual use in NZ.

old3eyes

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#2620204 11-Dec-2020 16:25

MikeB4:

tripper1000:

Nice, nice, that's really well thought out, like most of their other policy. In trying to stick-it to the man at the top, they kicking the man at the bottom in the teeth. Well done! I was hoping that with the Greens being being side-lined at the last election we'd see less of this nonsense.

I wonder if they're hoping to stimulate job creation for administrators and accountants by making it so expensive to pay the flat rate, that companies start calculating individual rates. There has been a bit of this type of job creation in the safety and building industry.

The debt created by Covid has to be serviced. This is better than an across the board PAYE tax increase. Yes I will be hit as my wife is in the high income bracket and there are a couple of small perks but Covid hit hard and the ferryman is wanting payment.

Didn't they just print more money??

Regards,

Old3eyes

GV27

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#2620207 11-Dec-2020 16:35

sen8or:

So this means, the ute you see at the rugby club / golf club on the weekend is (most likely) breaking the rules if the company isn't paying FBT for personal use.

Where this will hit "average joe worker" is things like workplace medical insurance, staff discounts on purchasing or other "small" benefits all of a sudden increasing in cost that will make some companies think twice about providing the benefit.

There's a sort-of accepted third option, which is to simply credit an equivalent contribution back to the company as income out of a shareholder current account as if it were a drawing for the use of the vehicle. I've never been 100% clear on whether it's acceptable as a proper contribution but it saves the hassle of registering for FBT and I never saw IRD pull anyone up on it and tell them to formally register for FBT instead of doing it.

The persistence of the double-cab ute thing isn't helped by opinion pieces preaching it as if it is hard-coded into the legislation like it's some sort of deliberate exemption instead of being a case of IRD not having the resources to fully enforce what they know to be a pretty widespread abuse of FBT rules.

Handle9

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#2620209 11-Dec-2020 16:38

networkn:
tripper1000:

Nice, nice, that's really well thought out, like most of their other policy. In trying to stick-it to the man at the top, they kicking the man at the bottom in the teeth. Well done! I was hoping that with the Greens being being side-lined at the last election we'd see less of this nonsense.

I wonder if they're hoping to stimulate job creation for administrators and accountants by making it so expensive to pay the flat rate, that companies start calculating individual rates. There has been a bit of this type of job creation in the safety and building industry.

We won't introduce any new taxes this term..

No, but you'll hike all the existing ones. Funny how this wasn't something they campaigned on during the election.

The change in top tax rates was campaigned on. Nothing else has changed, including the formula for calculating FBT.

Handle9

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#2620211 11-Dec-2020 16:42

tripper1000:
MikeB4: The debt created by Covid has to be serviced. This is better than an across the board PAYE tax increase. Yes I will be hit as my wife is in the high income bracket and there are a couple of small perks but Covid hit hard and the ferryman is wanting payment.

The fact that a bill has to be paid is no justification to single out a particular group at any time but particularly so when the debt was incurred for the benefit of all. That is banana-republic thinking.

If you read about labours tax rate changes, deregulation and fire-sale of state owned assets in the early 80's, you'll see that they had concluded that taxing upper income brackets at rates north of 60% was not working and was actually being counter productive. The conclusion was everyone had to pay their fair share of tax - you couldn't lump some people with a grossly disproportionate portion. With today's global economy, it is much easier to shift jobs off shore to softer tax regimes so the risks of a net loss in tax take is greater now than ever before. We see this classically with call centres, but it is also happening with higher tax bracket jobs such as marketing and executive management - how many companies have closed NZ head offices and manage the place out on Au, the US or else where? If you want to reverse this trend, raising the upper tax brackets is not the way to do it.

Companies are moving executive roles offshore because of personal tax rates? Mmmmkay.

BlinkyBill

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#2620213 11-Dec-2020 17:15

Looks like tripper1000 doesn’t understand how PAYE works either.

Geektastic

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#2620214 11-Dec-2020 17:18

I love the way that they think $180k is rich.

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