IRD under attack on FBT statement

Press, 3 July 1985, Page 37

IRD under attack on FBT statement

The Inland Revenue Department has been attacked for issuing a statement on the effect of the fringe benefit tax (FBT) on shareholder employees of companies with the first quarter applying to the tax ending this week-end. The deputy commissioner of Inland Revenue, Mr Robin Adair, said in a statement that shareholders of private companies who received their salaries without the deduction of PAYE tax would not be able to change back to having .PAYE tax deducted in order to receive an over-all advantage from the FBT legislation. Mr Peter Taylor, the chairman of the taxation committee of the New Zealand Society of Accountants’

Canterbury-Westland branch, said that the statement from the Inland Revenue Department was the fourth or fifth version on the position of the FBT as it applied to shareholder employees. The statement was indicative of the haste and lack of proper consideration in introducing FBT, which had caused considerable additional administrative work for chartered accountants and employers.

“Given that last week-end was the end of the first quarter for FBT return purposes, its timing can only add further confusion in this area,” he said.

The commissioner of Inland Revenue had discretion under the Income Tax Act, 1976, to permit such changes

to be made on the basis of remuneration of shareholder employees. Such discretion should be exercised on the facts of each case, which was provided for in the income tax legislation, Mr Taylor said. Mr Adair said that because of the introduction of the FBT legislation the department had received requests from companies to go back to a PAYE tax deduction basis for shareholder employee salaries. They had argued that any expenditure to provide shareholder employee benefits would qualify as a deduction for income tax purposes while the benefit itself would be subject to FBT.