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What is FBT?

Fringe benefit is a non-cash benefit provided to an employee by an employer. Also, if an employer enters into an arrangement under which a third person provides a benefit to an employee, the benefit is subject to FBT (CX2).  

FBT was introduced in 1985 and was to encourage employers to pay remuneration in cash rather than in benefits. The reason why employers are taxed rather than employees is for administration purposes, it is far easier to tax one employer rather than several employees. The employer files the FBT return and pays the FBT.

If you provide non-cash benefit to your employees you must register to file fringe benefit tax return, for small business owners there is an option to file and pay tax on anuual basis. If the benefit amount is paid back to the company then the there is no need to register and pay FBT.

What items attract FBT

A benefit provided to an employee by the employer attract FBT, the benefit is divided into two parts classified and unclassified:

Classified fringe benefits

Unclassified fringe benefits**

Use of motor vehicle

≥ $2000

Availability of motor vehicle

Gym memberships


International travel

Subsidised transport ≥ $1000

Discounted goods or services

Contributions to life insurance ≥ $1000


Contributions to accident, death or sickness benefit ≥ $1000


Contributions to superannuation or kiwisaver scheme≥ $1000


Note **De Minimis rules for exceptions to unclassified fringe benefits.  If the taxable value of the fringe benefit is not greater than $300/employee/one quarter then no FB is payable.  Section RD 45(2)(a).

Specific rules

Motor vehicles

To calculate the taxable value of the fringe benefit of motor vehicles (classified fringe benefit), the formula below is used (RD 29(5)(a)).

(Retes x Consideration x number of days** )/ 90(If FBT is paid quartely) or 365(If FBT is paid on income year basis)

** Number of days in terms of the Income Tax Act 2007, section RD 29(5)(a), refers to the actual number of days in the quarter where the motor vehicle was used for private use.

Deductions from number of days could be for:
1) If there was no availability of the vehicle
2) If vehicle was used for emergency purposes
3) If the vehicle was used for business trip away from employees home
4) If the vehicle was used as work related vehicle.


Quarterly FBT calculation

5% of GST-inclusive cost price


9% of GST-inclusive tax value


5.75% of GST-exclusive cost price


10.35% of GST-exclusive tax value

Income year calculation

36% of GST-inclusive tax value


23% of GST-exclusive cost price


41.4% of GST-exclusive tax value

Loans (low interest or zero interest)

To calculate the taxable value of the fringe benefit of low interest loans (classified fringe benefit), the formula below is used.

Interest rate %*** x Amount of loan x number of days
365 days

*** Interest rate is calculated by subtracting the actual interest with the prescribed rate. The prescribed rate is set by regulations and published by IRD in TIBs

Fringe benefits and Goods

Free or subsidised goods available to the employee are unclassified fringe benefits. Depending on the amount paid by the employee the goods may constitute a fringe benefit. Goods may be manufactured by the employer for sale or purchased by employer for re-sale.

Goods manufactured by employer

Section RD 40(1)(a) states to calculate the taxable value of the fringe benefit the below equation is used:

Selling price (including GST) – the price paid by employee incl GST

Goods purchased or paid for by the employer

Section RD 40(1)(b) states to calculate the taxable value use formula below

Cost price (including GST) – the price paid by employee incl GST

Entertainment and FBT

Entertainment can be subject to FBT if:

The employee can choose when to enjoy the benefit or the benefit is enjoyed outside NZ, and the benefit is not received or used in the course of, or as necessary consequence of, the employee’s employment duties.

Section DD 2 lists the following types of entertainment:
- Corporate boxes, marquees, and similar exclusive areas (permanent or temporary) at sporting, cultural or other recreational events or at activities taking place off the person’s business premises.
- Holiday accommodation (other than which is related to business activities).
- Yachts or other pleasure craft
- Food and drink provided at any of the venues above
- Food and drink provided off the person’s business premises (subject to certain exceptions), or
- Food and drink provided on work premises but in areas reserved, at the time, for senior employees (e.g. board room or executive dining room).