What is Fringe Benefit Tax (FBT) New Zealand?

FBT was introduced in New Zealand in 1985 to prevent employers and employees from converting taxable salary into tax-free non-cash benefits. The employer pays FBT on the value of the benefit as a proxy for the tax the employee would have paid had they received the equivalent amount as salary.

**Motor Vehicles** The most common FBT trigger is providing a company vehicle that employees use privately. The taxable value is 20% of the vehicle's cost (or tax book value, whichever is higher) per quarter under the cost method, or 36% per year under an alternative quarterly apportionment method. Vehicles used exclusively for business purposes (with appropriate restrictions and records) are exempt. Electric vehicles are subject to the same FBT rules from 1 April 2025 (the temporary exemption for low-emission vehicles expired).

**Low-Interest Loans** If an employer lends money to an employee at a rate below the FBT prescribed interest rate (set by IRD each quarter, approximately equal to the 90-day bank bill rate plus a margin), the interest benefit is subject to FBT. The taxable value equals the difference between interest at the prescribed rate and interest actually charged.

**Other Benefits** FBT applies to: health and life insurance premiums paid by the employer; car parks in central business districts; discounts on employer products or services beyond an arm's length price; and certain employer-provided housing.

**FBT Rates and Attribution** FBT is assessed at different rates depending on whether benefits are attributed (allocated to a specific named employee) or pooled (not allocated). Attributed benefits for employees with income between NZD 12,530 and NZD 70,000 are taxed at 49.25%. For employees with income between NZD 70,001 and NZD 180,000, the rate is 49.25%. For employees earning over NZD 180,000, the rate is 63.93%, reflecting the 39% top personal income tax rate. Pooled benefits (those not attributed to specific employees) are taxed at the flat rate of 49.25%.

**Filing Frequency** Employers can file FBT returns quarterly (returns due 28 April, 28 July, 28 October, and 20 January for the quarter ending 31 December), annually (due 31 May, for employers whose annual FBT liability is under NZD 500,000), or on an income year basis. Employers with significant FBT who file quarterly must also file an end-of-year square-up return if the pooled or attributed rates used during the year need adjustment.

**Exemptions and De Minimis** Some benefits are exempt from FBT: food and drink provided on employer premises as part of employment, safety equipment required for the job, and certain entertainment that meets the entertainment deduction rules. There is also a quarterly per-employee exemption of NZD 300 for unclassified fringe benefits (such as gifts, flowers, merchandise). Benefits under this threshold per employee per quarter are exempt from FBT.