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Fringe benefit tax on goods and services
Find out how to manage fringe benefit tax (FBT) on the free, subsidised or discounted goods, services or transport you provide to employees.
What's on this page
As an employer, you need to pay FBT on goods and services you provide to employees if they're provided at less than the:
- GST inclusive cost to you if you purchased or paid for the goods, or
- lowest GST inclusive price you sell identical goods to other customers (wholesale or retail) if you're the manufacturer, or
- normal GST inclusive cost to the public.
If you pay for an employee's home telephone, fax or internet connection, or their cell phone or pager, you'll pay FBT on the employee's private use when:
- the account is in your name as the employer, and
- you pay the whole account.
If the account is in the employee's name and you reimburse part or the full cost, the amount you pay is added to the employee's gross wages and PAYE deducted.
FBT on subsidised transport applies only to employers in the business of supplying transport to the public, eg, passenger services by air, road, rail or sea.
You need to pay FBT on subsidised transport when provided to an employee for less than 25% of the highest public fare - whether those services are provided by you or another public transport service provider.
Goods and services provided to shareholder-employees
Goods or services provided to shareholder-employees can be treated as either fringe benefits or dividends.
If you want to treat them as dividends, you need to inform us in writing. Do this within the timeframe for filing your FBT return, following the end of the FBT period the benefit relates.
If you don't inform us in writing, we’ll treat the benefits as fringe benefits.
You can provide up to $300 of free, subsidised or discounted goods and services per employee per quarter without having to pay FBT.
As soon as the value of the benefits goes over $300 per employee per quarter, the full value of the benefit is subject to FBT. The $300 exemption isn’t deducted first.
If you file annual returns, you have a yearly exemption of $1,200 for each employee.
The maximum exemption you can claim is $22,500 per year.
If the value of the benefits you provide goes over $22,500, then you must pay FBT on the total value of the benefits for the year in the current quarter.
Common items exempt from FBT
Distinctive work clothing
If you provide distinctive work clothing it will be exempt from FBT. This means any single item of clothing that forms part of a uniform identifiable with you (the employer) because of logos, pattern, colour scheme or style.
You don’t have to pay FBT if:
- you lease a car park for an employee where you have the exclusive right to occupy the car park, or
- you provide an employee with a car park on your premises.
Frequent flyer and membership reward schemes
If an employee joins a frequent flyer or membership reward scheme for their own use you don’t have to pay FBT.
FBT may apply if you enter into an arrangement with the promoter of the scheme to benefit employees.
Generally, charities are exempt from paying FBT on benefits provided to employees while they’re carrying out the organisation’s charitable activities. There’s more information in these guides:
The taxable value of the goods or services you provide to an employee is:
- For goods you purchase, the taxable value is the GST-inclusive price. For goods you manufacture, the taxable value is the normal GST-inclusive market price.
- For services you provide, the taxable value is the normal GST-inclusive market price, less any employee contribution you don’t reimburse.
- For subsidised transport you provide, the taxable value is the difference between 25% of the highest public fare and the amount the employee pays.
You need to keep separate records for different types of fringe benefits, for example gifts and prizes should be separate from subsidised or discounted goods and services. This is because you need to list them all separately in your FBT taxable value calculation sheet.
The records must show the:
- date of transaction
- name of employee receiving the benefit
- description of the benefit provided
- cost to employee
- cost to employer for goods
- normal market price for services, and
- highest price charged to the general public for subsidised transport.
You should also keep tax invoices where appropriate.