You may need to pay fringe benefit tax (FBT) on free, subsidised or discounted goods and services, gift cards, vouchers and entertainment benefits.
FBT on goods and services
You may need to pay FBT when you provide to employees:
- goods at less than the market value (the lowest wholesale or retail price that would normally be charged to other customers) if you manufacture the goods
- goods at less than the cost (the price you paid to purchase them) if you buy the goods from a supplier
- free gifts and prizes
- services below the normal price or the fee charged to the public (for example subsidising or paying for club memberships or reward schemes).
Some additional conditions apply to goods sold to employees with a staff discount.
The taxable value of the benefit includes GST.
For more detail, go to Part 3 – Unclassified benefits and gift cards of the Fringe benefit tax guide – IR409.
Gift cards
Gift cards include vouchers. There are 2 types of gift cards used to purchase goods or services: retailer-specific and general use.
Retailer-specific cards can only be used with the retailer named on the card, and FBT rules apply.
General use cards can be used at multiple retailers, and PAYE rules apply. This means the grossed-up value of the gift card is added to the employee’s salary or wage.
Gift card option from 16 April 2025
You can choose to apply the FBT rules to all gift cards and vouchers.
Gift cards are a classified benefit. However, they are treated the same as unclassified benefits, for working out whether you are over the limits for paying FBT.
If you use the FBT rules, include the value of the gift card with any other unclassified benefits you provide.
Entertainment
The following are specified types of entertainment for income tax purposes if you provide them to your employees.
- Corporate boxes and similar exclusive areas at sporting and recreational events
- Holiday accommodation
- Pleasure craft
- Food and beverages
When FBT applies to entertainment benefits
You need to pay FBT on entertainment benefits when all the following apply.
- The employee does not receive or use it in the course of their employment.
- It is not a necessary consequence of their employment.
- The employee can choose when to enjoy the benefit, or the benefit is enjoyed or consumed outside of New Zealand.
Benefits provided to shareholders
If your company provides unclassified benefits or gift cards to an employee who is a shareholder, you have 2 options.
You can:
- apply FBT rules to the benefit
- treat the benefit value as dividends.
If you choose to treat the benefit as dividends, do not include them in your FBT return. You must let us know before the FBT return due date if you choose this option. Do this by sending a message in myIR, including the return period the dividend relates to.
If you file paper returns, include a note with your FBT return. If you do not let us know, we’ll treat them as fringe benefits.
Discounted life insurance for agents
If you’re a life insurer providing insurance services to your employees including commission agents, for their own or family policies, discounted premiums are unclassified fringe benefits. You must include these in your FBT returns.
More information
For more information, go to Part 3 - Unclassified benefits and gift cards in the Fringe benefit tax guide – IR409.
Information for completing FBT worksheets