Fringe Benefit Tax (FBT) Explained for NZ Employers and Employees
A guide to Fringe Benefit Tax in New Zealand — what counts as a fringe benefit, FBT rates, common examples, and who pays the tax.
Published 15 February 2026 · Reviewed by NZ Tax Tools Editorial Desk
When an employer provides non-cash benefits to employees — such as a company car, subsidised housing, or discounted goods — Fringe Benefit Tax (FBT) applies. FBT is paid by the employer, not the employee, but it’s important for both parties to understand how it works.
What Is a Fringe Benefit?
A fringe benefit is any non-cash benefit provided to an employee (or an associated person) in connection with their employment. The benefit doesn’t need to be part of the employment agreement — if it’s connected to the employment relationship, FBT likely applies.
Common Fringe Benefits
Motor Vehicles
The most common fringe benefit. If an employer provides a vehicle available for private use (including commuting), FBT applies. The taxable value can be calculated using either:
- Cost method: 20% of the vehicle’s cost price (or tax book value) per year
- Per-kilometre method: Based on actual private use kilometres
Low-Interest Loans
If an employer provides a loan to an employee at below the FBT benchmark interest rate (currently around 8.27% for the 2025-26 year), FBT applies on the difference between the market rate and the rate charged.
Employer Contributions to Insurance, Medical, or Other Schemes
Payments by the employer toward an employee’s health insurance, life insurance, or other non-work benefits are fringe benefits.
Subsidised Goods and Services
If an employer provides goods or services to employees at below market value (e.g., discounted products), the discount may be a fringe benefit.
Free or Subsidised Housing
If an employer provides accommodation at below market rent, the difference is a fringe benefit.
FBT Rates
Employers can calculate FBT using different methods:
| Method | Rate |
|---|---|
| Single rate (simplified) | 63.93% |
| Short-form alternate rate | 63.93% (first 3 quarters), annual true-up in Q4 |
| Full alternate rate | Based on each employee’s marginal tax rate |
The 63.93% rate looks high because it’s a gross-up rate — it’s designed to be equivalent to the employee receiving the benefit as taxable income at the top marginal rate (39%) and having tax deducted.
Pooling by Attribute
Under the alternate rate method, employers can apply different rates based on the employee’s all-inclusive pay (cash pay plus fringe benefits):
| Employee’s all-inclusive pay | FBT rate |
|---|---|
| Up to $12,530 | 11.73% |
| $12,531 – $40,580 | 21.21% |
| $40,581 – $55,980 | 42.86% |
| $55,981 – $129,681 | 49.25% |
| Over $129,681 | 63.93% |
What’s Exempt from FBT?
Not everything triggers FBT. Common exemptions include:
- Employer KiwiSaver contributions (taxed via ESCT instead)
- Business tools provided primarily for work (e.g., laptops, phones used mainly for work)
- On-premises car parking
- Light refreshments at work (tea, coffee, fruit)
- Uniforms and protective clothing
Who Pays FBT?
The employer pays FBT — it doesn’t appear on the employee’s payslip or affect their personal tax return. However, the cost of FBT may influence employer decisions about what benefits to offer.
Filing and Payment
FBT is filed quarterly (or annually for small employers) using the IR420 return. Payments are due on the 20th of the month following the end of each quarter.