New Inland Revenue guidance suggests hard hats could be a taxable work perk. Photo: 123RF
New Inland Revenue guidance suggesting hard hats could be a taxable work perk could confuse some employers, one tax expert says.
IRD has released an update on when fringe benefit tax (FBT) exemptions apply to employee benefits provided for health and safety reasons.
Robyn Walker, tax partner at Deloitte, said there had been some confusion about how wide that exemption would be.
Fringe benefit tax generally does not apply when the benefit being provided is related to an employee's health and safety, aimed at managing health and safety risks, and would be excluded by an 'on-premises exemption' if it was provided at work.
Exemptions might apply to things like an ergonomic desk for someone working at home, or flu vaccinations.
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Work clothing has a separate exemption, but only if it is "distinctive", such as a uniform with an employer's name on it.
Walker said IR had made it clear that it did not think protective clothing would always fit into that exemption.
In one example it gave, a road maintenance contracting business providing workers with hard hats, high-vis clothes, safety glasses and ear muffs would find they were not exempt from FBT.
Walker said it was unlikely anyone would think a hard hat required for work was an employee benefit.
She said FBT was probably not being paid on these at present.
But it seemed IRD had assumed they were a benefit, and then were working out whether an exemption would apply, rather than discussing whether there was a benefit in the first place, she said.
"It could potentially push people to just incur additional costs having to brand things in order to be absolutely clear that there is no FBT payable on something where FBT shouldn't be payable to start with."
IRD said it was also its view that there was a benefit to an employee when their employer paid their medical costs after a workplace accident.
Walker said that was strange.
"While good health is obviously viewed as a benefit to an individual, in the situation of an employer assisting to put right a workplace accident to reinstate an employee's health, this does not seem like a scenario where FBT should be levied. Again, if it is concluded there is a benefit, a law change is warranted.
"If I chopped off my hand in some sort of terrible accounting photocopier accident I would expect that, if it's due to a fault of the photocopier that I've lost my finger or whatever it is then the employer should be paying my medical cost to rectify that.
"Is there a benefit where your health has been negatively impacted by a workplace accident to restore your health? It's hard to say there's a benefit if I have my finger chopped off and have it put back on. I start with 10 fingers, I go down to nine and I end up with 10. I'm not actually better off in that scenario.
"FBT should apply when the employer is doing something for the employee which saves them from having to incur their own private expenditure on something. And so I would say I shouldn't have to pay to get my finger attached because my fingers were all attached to start with and if I'm going to work on a construction site, I should be provided with everything that I required in order to go home at the end of the day without concussion, with all my fingers, my toes haven't been sliced off.
"Working in a freezing works, I should be able to have some gloves provided and there shouldn't be any tax on that. I'm not saving myself any private expenditure by having the employer provide what is required to do the job."
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