If you're providing special perks to your employees, like gym memberships or work vehicles for personal use, you're likely to be liable for fringe benefit tax (FBT).
Find out what you need to know on this page, and test yourself with our quiz.
FBT is a tax on benefits you provide to your employees. It applies to things like:
FBT doesn't apply to things already taxed for the employee, like:
Test your knowledge on employee allowances and fringe benefit tax. When you’re done, follow the links in the answers for more details.
Jim has a plumbing business with three employees and two vans. Jim uses one of the vehicles himself, and his second-in-command, Paul, takes the other home each evening and weekend.
When Paul first started, Jim let him use the van for non-work purposes at the weekend. This meant Jim had to pay FBT on 2/7th of the cost of the van.
Jim decides this is costing his business too much. He gets Paul to sign an agreement that he’ll only use the work van for getting to and from jobs. When he isn’t working, it stays parked at Paul’s house.
With no availability for personal use, there's no FBT payable on his use of the van.
There are four main groups of taxable fringe benefits:
You pay FBT on the cost of the benefit to the employee, eg the cost of the car for the portion of time it's available for personal use.
See formulas in the FBT guide(external link) — Inland Revenue
When you first start giving your employees the benefit, you need to register for FBT with Inland Revenue. You can register online or by calling Inland Revenue.
FBT categories(external link) — Inland Revenue
If you're still not sure how FBT works, it's worth getting professional advice. If you find out too late that you should have been paying it, it can result in a big bill.
Download the FBT guide (IR 409)(external link) — Inland Revenue
There are three options for filing returns:
Your choice might be limited depending on the type of company you have and how much tax you pay each year.
Which FBT return period is best for your business(external link) — Inland Revenue
Avoid these common FBT pitfalls: