Employers who give their staff free car parks will have to pay tax on them as the Government moves to tighten the tax rules on perks used as tradeoffs for salary.

The change will mainly hit those in the Auckland and Wellington central business districts where the benefits to the employee are greatest.

Revenue Minister Peter Dunne said car parks used by work vehicles, for late-night shifts and disabled car parks would be excluded from the tax net.

But the changes, to come into force next April, would tax more car parks. The new rules will replace an existing on-premises/off-premises distinction for determining whether a car park was subject to fringe benefit tax (FBT).

To reduce compliance costs, a standard value would be put on a car park if it was not provided through a commercial car park operator.

Labour's revenue spokesman David Clark rubbished the change, saying it was a desperate attempt to help the Government meet its Budget target. It amounted to "trying to get blood out of a car park".

“First the Government produced its petty paper boy tax, now it's putting a tax on car parks.

"What next - grocery vouchers? Actually, it's taxing them too," he said.

Labour would instead bring in ‘pro-growth' tax reform that will ensure speculators pay their fair share.

Mr Dunne said Cabinet had opted for a narrower rule change than the suggestions outlined in an April 2012 issues paper "Recognising salary tradeoffs as income".

“We have listened to public submissions and the proposed new rules are now narrower than originally suggested, focusing predominantly on employer-provided car parks,” he said.

"The changes are about ensuring that tax is applied fairly, but without imposing undue compliance costs."

But he confirmed that explicit salary tradeoffs involving vehicles and car parks as well as vouchers for groceries or petrol, would be included in the definition of income when it came to calculating social assistance entitlements and obligations.

The current FBT treatment for charitable organisations would be retained, but the rule change would make it clear that charitable organisations' FBT exemption would not generally apply to vouchers.

The changes will be in a tax bill scheduled for introduction next month.

- © Fairfax NZ News

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