You need to pay fringe benefit tax (FBT) on any fund contributions or premiums you pay on behalf of an employee.
The 4 types of contributions are:
- sickness, accident or death benefit funds (that we have approved)
- funeral trusts
- insurance funds of a friendly society or specified insurance premiums for life, accident or medical insurance policies
- superannuation schemes where employer superannuation contribution tax (ESCT) or PAYE rules do not apply.
Life insurance contributions
If you take out and pay for an insurance policy for an employee, you must pay FBT on the premiums.
However, if the policy benefits you (not the employee), such as with key person insurance, there is no FBT because the employee does not receive a benefit. The premium payments are also not taxable income for the employee.
If an employee or their family member takes out an insurance policy and you pay the premiums, the payments are included in the employee’s taxable income and the PAYE rules apply. You do not pay FBT on these contributions.
Taxable value of contributions
The fringe benefit taxable value is the total premium or contribution you made, calculated on a GST-inclusive basis, unless the goods and services being provided are zero-rated or exempt from GST.
Attributing contributions to individual employees
You must attribute the contributions benefit to the employee who receives it if the yearly amount of the benefit for the type of contribution is at least $1,000 for that employee. Otherwise, you can pool the benefits and tax them all together.
Specified insurance premiums
From 1 April 2026, if you make a contribution to an insurance fund of a friendly society or provide a specified life, accident or medical insurance, where all employees have the same or similar benefit, you have 2 options.
You can:
- attribute by dividing the total contribution by the number of employees.
- pool the benefit and pay FBT at the applicable pooling rate.
Attributing fringe benefits to individual employees
For more information
Go to Part 6 – Contributions to funds, insurance and superannuation schemes in the Fringe benefit tax guide – IR409.