10 July 2025

Fringe Benefit Tax – getting the basics right and staying ahead of upcoming changes 

What is FBT and why does it matter?

Fringe Benefit Tax (FBT) is a tax payable by employers on certain benefits they provide to employees outside of standard wages or salary. These “fringe benefits” can be valuable additions to remuneration packages, often critical to attracting and retaining top talent – but if not managed correctly, they can also create hidden tax liabilities.

FBT is in place to ensure there is equity between cash and non-cash remuneration, and Inland Revenue (IR) is placing increasing focus on employer compliance. 

What does FBT commonly apply to?

While any non-cash benefit provided to an employee may attract FBT, some of the most common classes of benefits that attract FBT involve: 

  • Business vehicles made available to employees (including shareholder employees) for any private use 
  • Low-interest loans provided to employees 
  • Subsidised travel or transport 
  • Discounted/free goods and services, including vouchers or entertainment 
  • Club memberships, gym passes, and insurance contributions 

Common misconceptions

The FBT regime has evolved over time without an overarching legislative strategy, and as a result it has become increasingly complex to administer. Some common errors or misconceptions include: 

  • “Our utes are exempt” – even if a vehicle is sign-written or mainly used for work, if it’s available for private use (like home-to-work travel), FBT can apply. 
  • Incorrect attribution methods. Employers may be using the wrong FBT calculation or filing method, or treating GST components incorrectly, resulting in over- or underpaid tax. 
  • Assuming some benefits are too minor to matter. Vouchers, tickets, gifts including flowers for a bereavement as well as any digital perks aggregate and can become taxable fringe benefits if not specifically exempted or certain under low value thresholds (on a per employee as well as a total workforce basis).  
  • Not picking up the distinction between ‘open loop’ gift cards (for example Prezzy Cards) and ‘closed loop’ cards (for example store cards) provided to employees, and their differing tax treatments (PAYE on the former, FBT on the latter).  

What may be changing?

Officials recognise the increased complexity of the regime and the resulting compliance costs for employers. Some options currently under consultation are focused on Motor Vehicles & Unclassified Benefits. 

Motor vehicles

  • The introduction of three simple categories of non-emergency vehicle usage, replacing the work related vehicle (“ute”) exemption
  • Simpler valuation frameworks, applicable for four years, and dispensing with the need for logbooks 
  • A limitation on shareholder employees of close companies to exempt vehicle usage if the vehicle cost exceeds $80,000 

Unclassified benefits

To try and address compliance burdens involving tracking low value unclassified benefits against de minimis thresholds, and navigating the overlap with the entertainment tax regime, IR has proposed either excluding all benefits provided below $200, and/or expanding the list of exempt items (which may include some items currently captured in the entertainment regime). 

What should you do?

If you provide any of the above to your employees, it’s important to reflect on your FBT obligations carefully. Given the changes in the regime, now is a good time to:

  1. Review whether your vehicle policies and tracking methods meet FBT standards
  2. Ensure you’re correctly attributing and reporting any non-cash benefits
  3. Keep an eye on our announcements regarding consultation outcomes

Next steps

We’re here to help. If you’re unsure about your current FBT obligations or want to prepare for the proposed changes, our team can assist with a practical review and tailored advice. If you’re unsure whether your current benefits trigger FBT or if you’re handling your obligations correctly, our team can review your situation and help you stay compliant. Talk to our team of expert Advisors today.

About Nexia New Zealand

Nexia New Zealand is one of New Zealand’s leading full-service chartered accounting and business advisory consultancy firms, offering the full range of chartered accounting, business advisorycorporate advisorytaxauditinsolvencyliquidation and receivership services. 

Nexia New Zealand has four offices throughout New Zealand: Victoria Street in ChristchurchAlbany on Auckland’s North ShoreNewmarket in the Auckland CBD and Hastings in Hawke’s Bay.

Find updates