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Fringe benefit tax (FBT) is a tax you pay on most non-cash benefits you provide to your employees.
If you're an employer and you provide benefits to your employees over and above their salary or wage (fringe benefits), you may need to pay FBT.
While the cash benefits you give employees (eg salary or wages) get taxed through income tax, the non-cash benefits don’t.
FBT was introduced to tax these non-cash benefits (fringe benefits).
Now, all employee benefits – both cash and non-cash – get taxed equally, no matter how they’re provided. It keeps things fair.
As an employer, you need to register for FBT when you first start giving your employees, shareholders, or other people associated with your business, a fringe benefit. You can choose to register for FBT when you complete the Employer registration form (IR334).
If you already provide fringe benefits, but aren’t registered yet you will need to register from the date you first provided a fringe benefit. You may need to file returns for earlier periods and make any outstanding payments. Give us a call and we can help get you sorted.
Once you’re registered for FBT you need to:
There are four main types of fringe benefits. If any of these are received by your employees as a result of their employment, you may need to pay FBT:
Business-related entertainment expenses, where the benefits are enjoyed by employees, can be subject to FBT.
If it’s an entertainment expense which is only 50% deductible (because it has a significant private element), it isn’t subject to FBT. The exception is if:
Learn more about entertainment expenses and FBT in our Entertainment expenses guide (IR268).
You don’t have to pay FBT if you make a cash payment to an employee. Instead, you treat the cash payment as part of the employee's salary or wage and make normal employee deductions (like PAYE).
An employer is anyone who pays, has paid, or will pay, salaries, wages, lump sums or schedular payments. For FBT purposes, the definition also includes:
An employee is anyone paid a salary, wage, lump sum or any other payment for the work they do. For FBT purposes, the definition also includes:
The following people aren't employees for FBT purposes:
You only need to pay FBT on fringe benefits provided to employees.
Taxable value is the actual cost of the fringe benefit. The way you work out the taxable value depends on the type of benefit and who you provide it to. For example, the way you work out the taxable value of a motor vehicle is different from the way you work out the taxable value of a low interest loan. You need to know the taxable value in order to calculate FBT.
Attributed benefits are fringe benefits assigned to an individual employee, that only they use or enjoy. For example, Maru’s monthly bus pass.
Non-attributed benefits are pooled or shared fringe benefits that are not assigned to an individual employee. This option is useful when all employees have the same or similar rights to a particular benefit. For example, a work motor vehicle that everyone can use.
Some non-attributed benefits need to be attributed when you calculate FBT.