Question

Is the FBT or dividend ?

Jacky Oasis is a beauty consultant at Goodlook Ltd, and she owns 100% of the shares in this company. The company pays her a salary of $60,000 p.a.​

In 2017-18 Goodlook Ltd:
- paid Jacky’s life insurance premium on her behalf. This policy was taken out by Jacky with Cigna NZ and the sum insured is payable to Jacky’s family in the event of her death.
- provided Jacky’s daughter, Carol with a new phone (cost GST inclusive $1,250). Carol is in her first year doing her BAcc at Massey University.
- as a goodwill gesture, bought a Christmas hamper worth $200 for each of its five employees’ spouses.

Goodlook Ltd files annual FBT returns. Both the iPhone and hampers were provided in the third quarter.

1.What is the FBT or dividend implication for Goodlook Ltd in providing the iPhone to Carol?
2.What is the FBT or dividend implication for Goodlook Ltd in paying Jacky’s life insurance premiums?
3.What is the tax implication of the interest free loan from Milo Ltd to Barbie Family Trust?

Answer 1

1. Assuming that Carol is not a non executive director, the tax is a deductible expense, and is payable by the employer on a quarterly basis 30 June, 30 September, 31 December and 31 March, or annually, or on an income year basis. It is required to be paid to the IRD by the 20th of the month following the end of the quarter or such dates stipulated within the FBT rules

2. The implications will be same as in Part 1

3. Part 3 is unrelated with the question case given of Carol