| FBT and In-house Benefits |
| An exemption exists for the first $500 of in-house benefits (ie. Goods and services, which the employer sells or supplies to a third party in the ordinary course of business,) given each FBT year to an employee or to his/her associates.
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For goods normally sold to the public, the value of any in-house benefit is 75% of its arm?s length value. Depending on the circumstances, that could be based on the retail or wholesale price, or even a lower value if that represents the arm?s length value.
For non-retail goods, the value is usually the lowest arm?s-lengths selling price to their ordinary customers, less any employee contribution.
For an employer providing benefits in this way, there can be a ?win-win? situation for both the employer and employee. The employer gets to sell more goods while the employee gets to purchase their ?Christmas presents? at a discount. Provided that the threshold is not exceeded there is no FBT payable by the employer.
Example
A clothing manufacturer/retailer sells their designer jeans retail at $100, but sells to staff at $50 each. For FBT purposes, the taxable value is
75% x $100 = $75.00 less $50 = $25
The employer could provide an employee with up to 20 units of such clothing to the retail value of $2,000 and be exempt from FBT under this rule.
See also our other articles about FBT.
27th-January-2004 |
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