Frequently Asked Questions: FBT – Update on Recent Changes and Considerations for Q4 Filing

With regards to the business travel exemption from FBT, the Commissioner stated the following (see paragraph 146 of IS 17/07):

“The business travel exemption will apply only where an employee is absent from home “with” the vehicle. If the vehicle is parked at an airport while the employee travels by plane to another destination, then the vehicle is not “with” the employee and the exemption will not apply.”

Although the business travel exemption doesn’t apply in this airport parking situation, on the basis the employee doesn’t have access to the vehicle, the days between the employee’s departure and return are exempt from FBT. FBT may still apply on the day of departure and the day of return if the employee has not been restricted from using the vehicle for private purposes (see Fringe Benefit Tax Guide IR409).

If the sign-written ute satisfies the criteria for being a work-related vehicle, it can be exempt from FBT on the days it is not available for private use. Inland Revenue requires the private use restriction letter to state the actual days that the vehicle is available for private use and you cannot just say any 2 days in a week, as this essentially means the vehicle is available on any day and full FBT would apply (see Fringe Benefit Tax Guide IR409). Inland Revenue also requires 3-monthly checks along with records to make sure the vehicle is only used for business related purposes.

In terms of a motor vehicle made available for the private use of a shareholder-employee, the Commissioner agrees with the following evidence requirement considered by the Tax Review Authority (see IS 17/07, paragraph 268):

• Evidence relating to the company’s intentions as to what the vehicle would be available for (for example, letters from directors or evidence of the anticipated business use).
• Evidence concerning the actual use of the vehicle, including log books and taxpayer statements.
• Evidence that the shareholder-employees have access to an alternate vehicle for private use.

"Regularly absent from home" is not a defined term under the Income Tax Act 2007. In IS 17/07 Fringe Benefit Tax - Motor Vehicles, the Commissioner's position on this requirement for the purposes of the business travel exemption is as follows (see paragraph 150 in IS 17/07):

"The Commissioner considers that in the context of s CX 6(4) “regularly absent from home” should be interpreted as meaning travel that occurs with reasonable frequency or at short uniform intervals, such as monthly travel. Infrequent or occasional travel (for example, a yearly trip, even if the trip was for the same reasons, say attending an annual conference) would not satisfy this requirement."

The work-related vehicle exemption may apply to exempt the utes from FBT provided the vehicles meets all the "work-related vehicle" criteria on each day and that the vehicles are clearly prohibited from any private use. In terms of documentation to support this position, Inland Revenue would expect the following evidence (see IS 17/07):

• The directors/shareholder‑employees are notified in writing that the vehicle is not available for private use at all times, except home–work travel that is necessary in, and a condition of, employment, and incidental travel that occurs during those journeys.
• Records of quarterly checks undertaken by the employer to ensure the vehicle has not been used privately to support the work-related vehicle claim.
• Evidence relating to the company’s intentions as to what the vehicle would be available for (for example, letters from directors or evidence of the anticipated business use).
• Evidence concerning the actual use of the vehicle, including log books and taxpayer statements.
• Evidence that the shareholder-employees have access to an alternate vehicle for private use.

The 63.93% FBT rate does not apply just because the person is a major shareholder and only earns PAYE. The FBT rate to apply to the shareholder employee will depend on a number of factors:

• If the vehicle is attributed to that shareholder-employee (ie they are the principal user), it’s an attributed benefit, and the FBT rate depends on the method you use (single-rate/short-form vs alternate rate based on all‑inclusive pay), not automatically 63.93%.
• If the vehicle benefit is not attributed (ie it is a pooled/non-attributed benefit) and a major shareholder-employee is one of the recipients, then the 63.93% rate applies to that non-attributed pool.

Also, Inland Revenue notes the “use 63.93% because remuneration details aren’t available” shortcut is aimed at situations where details aren’t known when filing; it does not apply to income-year filers (shareholder-employees) because information should be known by then.

Under the quarterly filing option, employers have 2 options to calculate their FBT liability for Q1 to Q3, the 63.93% single rate or the 49.25% alternate rate.

If the employer pays FBT at the 49.25% alternate rate for Q1 to Q3, the employer must undertake the alternate rate calculation for Q4 and use 1 of the 3 alternate rate calculation options (either the full alternate rate, short form alternate rate or pooled alternate rate) to calculate the FBT payable.

If the employer pays FBT at the 63.93% single rate for Q1 to Q3, when it comes to Q4, the employer can choose to either complete the Q4 calculation at the 63.93% single rate, or undertake the alternate rate calculation using 1 of the 3 alternate rate calculation options (either the full alternate rate, short form alternate rate or pooled alternate rate) to calculate the FBT payable.

If the alternate rate calculation option is used in Q4, FBT paid in the first 3 quarters is then subtracted from the 4th quarter calculation to arrive at the amount payable. Essentially the Q4 FBT return is the year-end "wash-up" calculation under the alternate rate calculation option.

The $160,000 gross pay is relevant for the pooled alternate rate option introduced in 2021. This alternative option was introduced following the increase in the top personal tax rate to 39% to reduce the possibility of over-taxation on fringe benefits where employers choose to apply the flat rate instead of carrying out the full alternate rate calculation.

Under the pooled alternate rate option, attributed benefits are effectively split into two pools and taxed at flat rates:

• 49.25% for benefits attributed to employees who are within the "safe harbour" threshold, which is cash pay up to $160,000 and attributed benefits up to $13,400. There is also an ability to include certain employees in the 49.25% pool if they are below an all‑inclusive pay threshold of $130,724 (the threshold was $129,681 before 1 April 2025) even if they exceed the safe harbour limits.
• 63.93% for benefits attributed to employees outside those safe harbour thresholds.

The pooled alternate rate option is designed to provide a more practical mix of accuracy and simplicity for employers compared with the other FBT payment options. This option is likely to appeal to employers who mainly provide attributed benefits to employees earning under $180,000 in gross cash pay, particularly where those employees fall within the “safe harbour” thresholds—meaning they earn up to $160,000 in gross cash pay and receive no more than $13,400 each in attributed benefits for the year. Please refer to Special report on FBT - pooled alternate rate option (published by Inland Revenue on 31 March 2022) for further commentary on this policy.

The FBT rate of 63.93% is not only for major shareholder-employees—it is also the top FBT rate that applies to attributed benefits for employees whose “all-inclusive pay” is in the top band (all-inclusive pay $130,724+, which broadly corresponds to cash income over $180,000). Therefore:

• Attributed benefits (eg, a motor vehicle attributed to that employee): use the rate that applies to the employee’s all-inclusive pay under the alternate rate approach; for an employee in the top band this is 63.93%.
• Non-attributed (pooled) benefits: if the recipients are not major shareholder-employees (and not their associates), the pooled rate is 49.25%. The 63.93% pooled rate is only required where a major shareholder-employee (or their associate) is one of the recipients.

(If you are using the short-form alternate rate option specifically, it applies 63.93% to all attributed benefits and 49.25% to non-attributed benefits, unless there is a major shareholder-employee recipient.)

Yes there is a reconciliation step required for the Q4 calculation if one of the alternate rate calculation method (full alternate rate method, short form alternate rate method or pooled alternate rate method) is used.

If the alternate rate calculation option is used in Q4, FBT paid in the first 3 quarters is then subtracted from the 4th quarter calculation to arrive at the amount payable.

FBT is not payable only if you are within the de minimis thresholds:

• Per employee threshold: total unclassified benefits (including gift cards) provided to that employee in the quarter is $300 or less (for quarterly filers) (or $1,200 or less for annual/income-year filers).
• Employer threshold: total unclassified benefits provided to all employees over the year is $22,500 or less.

For FBT purposes, gift cards given as prizes to specific employees are unclassified benefits / gift cards (taxable value = amount loaded/face value).

Attributed vs non-attributed (pooled):

• They are attributable once a particular employee receives the gift card (you can identify the recipient, and Inland Revenue expects records by employee unless you’re pooling).
• However, you can treat them as non-attributed (pooled) unclassified benefits where the employee’s total unclassified benefits/gift cards are $2,000 or less per employee per year (the attribution threshold).

Therefore, bulk purchasing for an awards programme doesn’t change the character—at the point you issue a card to a winner, it’s attributable unless you are eligible to pool because the employee remains under the $2,000 per-year attribution threshold.

If a company pays a clothing reimbursement/allowance (cash) to customer-facing staff (eg, “business attire”), that is generally taxable to the employee under PAYE (it’s normally treated as a private clothing cost), rather than being dealt with under FBT.

If instead the company provides the clothing (or pays a supplier for the clothing) as a non-cash benefit, it can be an unclassified fringe benefit unless an exemption applies.

Key exemptions that may apply are:

• Distinctive work clothing (uniform) – no FBT if the item(s) form part of a uniform that is identifiable with the employer (eg permanent and prominent logo/identification, or pattern/colour scheme/style readily associated with the employer), is worn in the course of employment, and is not clothing employees would normally wear privately. Generic/retail clothing that doesn’t identify the employer will not qualify (and can be subject to FBT).
• Health and safety (PPE) – no FBT for items provided to manage workplace health and safety risks (eg protective/high-visibility clothing); PPE does not need business branding to qualify.

Most expenses are generally subject to FBT (rather than being treated as business-use/exempt) where they are non-cash benefits provided to an employee that have a private element and are not received/used in the course of employment duties. Common examples include:

• Private use of employer-provided motor vehicles (company cars available for private use).
• Subsidised transport (in the FBT sense—eg discounted transport services provided by an employer that supplies transport to the public).
• Employment-related loans (eg low/zero interest loans).
• Employer contributions to:
  • superannuation schemes (noting some NZ contributions are instead dealt with via ESCT)
  • sickness, accident or death benefit funds; funeral trusts
  • life or health insurance premiums.
• Free, subsidised or discounted goods and services ("unclassified benefits"), including gift cards/vouchers.
• Entertainment-type benefits where the employee can choose when to enjoy them (or they’re enjoyed outside NZ) and they’re not part of employment duties—eg meal vouchers as incentives, all-expenses-paid overseas incentive trips, etc.
• Transport/accommodation costs for non-business entertainment travel (eg flying staff to attend a rugby test in a corporate box), where the travel is not to enable the employee to perform their duties.

Note, if an item qualifies for a specific FBT exclusion (eg certain business tools, on-premises benefits, or health & safety risk management), it may be excluded instead of being subject to FBT.