Fringe Benefit Tax (FBT) for New NZ Companies: A Director's Guide
Fringe Benefit Tax catches many new NZ company directors by surprise. If your company provides a car, pays for health insurance, or gives employees discounts, you may have an FBT obligation starting from day one.
What is Fringe Benefit Tax (FBT)?
Fringe Benefit Tax (FBT) is a tax paid by NZ employers when they provide non-cash benefits to their employees. It is designed to ensure that benefits provided instead of wages are taxed in the same way as salary.
FBT is paid by the company, not the employee. The rate is set so that the tax cost to the employer is roughly equivalent to the income tax the employee would have paid if the benefit were paid as salary.
What counts as a fringe benefit?
Common fringe benefits that trigger FBT for new NZ companies include:
- Company vehicles made available for private use (including the drive to and from work)
- Low-interest or interest-free loans to employees (including director-shareholders)
- Subsidised or free goods and services provided to employees (e.g., product discounts, free meals)
- Private health or life insurance premiums paid by the company for employees
- Employer contributions to employee superannuation (beyond KiwiSaver)
FBT rates
The standard FBT rate is 49.25% (for employees with an annual income over $160,000). The alternate rate method allows different rates based on employee income:
- 63.93% for employees earning over $160,000
- 49.25% for employees earning $70,001 to $160,000
- 42.86% for employees earning up to $70,000
Most small NZ companies use the flat rate of 63.93% because it is simpler to calculate, even though it may mean paying slightly more FBT.
FBT filing periods
New NZ companies generally file FBT quarterly:
- Q1: 1 April to 30 June, due 20 July
- Q2: 1 July to 30 September, due 20 October
- Q3: 1 October to 31 December, due 20 January
- Q4: 1 January to 31 March, due 31 May (annual reconciliation)
You can also choose to file annually if your annual FBT liability is under $500,000.
What is exempt from FBT?
Not everything is subject to FBT. Key exemptions include:
- Work-related use of a vehicle (but private use always triggers FBT)
- KiwiSaver employer contributions (subject to employer superannuation contribution tax (ESCT) instead)
- Mobile phones and other telecommunications equipment used primarily for business
- Work-related training and study
- Minor and infrequent benefits below the minor benefit threshold (each benefit under $300 GST-inclusive per quarter, provided infrequently)
The company vehicle trap
The most common FBT trap for new NZ company directors is the company vehicle. Even if a car is genuinely used mainly for business, if it is available for private use overnight or on weekends, FBT applies to that availability. The vehicle must be garaged at the business premises (not at the director's home) overnight for private-use FBT to be avoided.
Director-shareholders and FBT
FBT applies to benefits provided to shareholder-employees of close companies. If you own and run your NZ company and the company provides you with a car, health insurance, or other benefits, FBT applies just as it would for any employee.
Getting FBT right from the start
FBT is one of the areas where many new NZ company directors make costly mistakes. An accountant who specialises in NZ small business tax can ensure you are registering for FBT correctly, choosing the right filing frequency, and taking advantage of all available exemptions.
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