Carpark anomaly remains in place

The Government has dropped controversial plans to bring employer-provided carparks into the fringe benefits tax net.

Finance Minister Michael Cullen also announced moves yesterday to remove problems for people with savings in foreign superannuation schemes, including Australia's compulsory workplace savings schemes, arising from New Zealand's foreign investment fund (FIF) rules.

And in a speech to the annual International Fiscal Association conference in Christchurch Cullen confirmed that changes to reduce tax compliance costs for small businesses, foreshadowed last year, would be included in the next tax bill, to be introduced to Parliament next month.

At present, because of an exemption for benefits provided "on an employer's premises", carparks which are leased can escape fringe benefit tax while those which are licensed cannot.

Officials proposed to exclude carparks from the "on the premises" exemption, but limit the change to parks in central business districts.

The proposal was widely opposed as impractical and tax accountants said yesterday dropping it was a sensible move, but it would leave the anomaly intact.

The Government is going ahead with another foreshadowed change, however, which is to give employers the option of valuing company-provided cars for fringe benefit tax purposes either on the basis of their original cost - but with the annual benefit calculated at 20 per cent of cost instead of 24 per cent previously - or on the written-down value of the vehicle in the company's books, in which case the rate would be 36 per cent.

It has kicked for touch, at least until the May 19 Budget, the vexed question of the treatment of vehicles which are used for private and business use.

And it is to raise the threshold for fringe benefits other than the specified ones like vehicles, loans and superannuation to $15,000 a year per employer or $800 per employee, from $1800 and $300 respectively now.

"That should drop a lot of firms out of the FBT net altogether," PricewaterhouseCoopers tax partner Scott Kerse said.

Cullen said last year's Australia-New Zealand Leadership Forum had raised the issue of the tax treatment of savings in Australia's workplace superannuation schemes.

"Those who come to New Zealand for long-term or permanent employment - whether Australians or returning New Zealanders - may be required to pay tax on those or subsequent entitlements under our foreign investment fund rules," he said.

"There are exemptions ... but determining what qualifies and what does not is not always easy."

Cullen said he proposed to exempt specified Australian employment-related superannuation schemes from the FIF rules.

Kerse said the move was welcome. "I suspect there is quite a lot of what you could call accidental evasion ... because the rules which apply are so complicated."