You may need to pay fringe benefit tax (FBT) when you provide goods or services to your employees at a price lower than the benefit’s value. This includes goods and services provided to your employees by someone else on your behalf.
Gift cards are a classified benefit. However, they are treated the same as unclassified benefits, for working out the limits to determine FBT.
What are unclassified benefits?
Unclassified benefits are all benefits not specifically listed in legislation or excluded from the FBT rules. They include free gifts, prizes, and subsidised or discounted goods or services.
Types of unclassified benefits and gift cards
Reimbursing employees’ personal expenses
Reimbursing employees for personal expenses is an unclassified benefit if both of the following apply.
- You choose to use the FBT rules instead of deducting PAYE.
- The expense would be an unclassified benefit if you had provided it directly to the employee.
If the reimbursed amount is the same as or below the limits, you do not need to pay FBT or deduct PAYE.
Limits for paying FBT on unclassified benefits
No FBT on some benefits
Some benefits may be exempt or excluded from FBT. These include:
- charitable organisation exemption
- health and safety exemption
- public transport and employer-provided transport exemptions
- exclusions for distinctive work clothing, car parks, and membership reward schemes.
Exemptions and exclusions for unclassified benefits
Working out how much FBT to pay
You pay FBT based on the benefit’s GST-inclusive taxable value, less any employee contribution you have not reimbursed.
Limits for paying FBT on unclassified benefits and gift cards
If the taxable value of the unclassified benefits and gift cards is more than the limit, you must pay FBT on the full amount.
- Limit for each employee – $300 for quarterly returns or $1,200 for income year or annual returns.
- Annual limit for all employees – $22,500.
If the taxable value is not more than these limits, then you do not pay FBT.
Limits for paying FBT on unclassified benefits
Attributing benefits to individual employees
The annual taxable value for attributing unclassified benefits and gift cards to individual employees is $2,000.
Attributing fringe benefits to individual employees
More information
For more information about unclassified benefits and gift cards, go to part 3 of the Fringe benefit tax guide – IR409.