IRD often issues clarification on tax questions that taxpayers have raised with them. IRD has recently clarified the FBT, GST and income tax implications when a shareholder-employee or employee makes a full or partial contribution to their employer or a third party for non-cash benefits received e.g. making a vehicle available to an employee for private use.
In summary:
(i) Contributions made by the employee to the employer reduce the taxable value on which the employer must pay FBT. If the contribution by employee reduces the taxable value of the fringe benefit to nil, their is no FBT liability.
(ii)The employer must return the employee contributions for GST purposes.
(iii) The employee contribution net of GST is income of the employer for income tax purposes.
(iv) If the benefit is provided by a third party to the employee for the employer, the employer is not required to account for GST or include as income, an employee contribution made to the third party.
We will attach a link to IRD's article one publicly available..