New Zealand

Details

  • Service: Tax
  • Type: Business and industry issue
  • Date: 19/04/2012

Contact us

Paul Dunne
Partner - Tax
KPMG
Phone: +64 9 367 5991

pfdunne@kpmg.co.nz 

 

John Cantin
Partner - Tax
KPMG
Phone: +64 4 816 4518

jfcantin@kpmg.co.nz

Tax

Our tax advisory team has the skills and commitment to help you to be competitive and compliant in all areas of business tax.

Taxmail - Salary sacrifice proposals painful for employers 

Issue 1, April 2012

 

Inland Revenue and Treasury yesterday released an issues paper targeting exempt benefits provided to employees, where there is an element of salary trade-off (i.e. where cash salary is substituted for certain non-taxed benefits, such as car parks and childcare).

taxmail - salary sacrifice
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The options presented are to either tax such benefits as salary (subject to PAYE) or under the Fringe Benefit Tax rules (by restricting the current FBT exemptions). 

 

Benefits will be taxed whether the salary sacrifice is explicit or implicit.  They would also be counted for social assistance purposes, such as student loans repayments and Working for Families benefits.

 

While the proposals may be equitable in concept, there is a real risk of unintended consequences.  Employers will have to be very careful to identify all benefits provided, even where there is no formal salary sacrifice. 

 

It is also concerning that these proposals undermine exemptions that are there to reduce compliance costs.  Care will be needed with implementation to avoid causing unnecessary pain to employers.

 

Charities will also be hit hard by these proposals, which will severely restrict charities’ tax exemption for benefits provided to employees – thus likely raising costs in a sector where typically every dollar counts.

 

This taxmail discusses the salary trade-off proposals in greater detail.

 

If you have any questions on the above, please speak to your usual KPMG advisor, or contact Paul Dunne or John Cantin.

Taxmail - Comment on topical tax issues from KPMG NZ Tax. 

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