Do you provide fringe benefits to your employees? If so, you may need to update the tax treatment of these benefits to fall in line with the new fringe benefit tax (FBT) legislation.

There have been some recent changes to fringe benefit tax. But what exactly is fringe benefit tax (FBT) and how does this tax affect you as an employer?

What is fringe benefit tax?

A fringe benefit is a non-cash benefit that you, or a third party, provide to one of your employees. This could include benefits like offering employees a car, health insurance, gym membership, gift cards and staff discounts, etc.

In situations where you provide fringe benefits to your employees, you may need to pay fringe benefit tax (FBT) on these benefits.

How does FBT work?

As an employer, you’ll pay FBT on the cost of the benefit that you’re supplying to one of your employees. So, if you provide health insurance, for example, you’ll pay FBT based on the overall cost of providing this insurance to your team member. 

There are four main groups of taxable fringe benefits:

• Motor vehicles available for personal use
• Free, subsidised or discounted goods and services
• Low-interest loans (other than those provided by life insurance companies)
• Employer contributions to sickness, accident or death benefit funds, specified insurance policies, and superannuation schemes not subject to employer superannuation contribution tax (ESCT).

You must register for FBT with the Inland Revenue as soon as you start providing the benefit (or benefits) to your employer.

You can register online or by calling the Inland Revenue on 0800 377 772.

What are the recent changes to FBT?

From April 2026, changes to FBT have been introduced that may affect how employers treat certain benefits.

In some cases, you now have more flexibility to choose whether to apply FBT or to treat a benefit as employment income with PAYE deducted.

It’s worth reviewing how you currently treat the affected employee benefits to make sure you’re complying with the new rules.

Benefits where the rules have changed include:

• Gift cards - employers can choose to either apply the FBT rules to gift cards or treat them as employment income and deduct PAYE. Under the FBT rules, gift cards are treated as unclassified benefits when applying the limits. This means if the fringe benefit is below the limit, no tax applies.
• Equalisation of FBT and PAYE - for employee reimbursements that would otherwise be unclassified benefits, employers may now choose to apply the FBT rules or treat the amount as employment income and deduct PAYE.
• Health and safety equipment - unbranded personal protective equipment is exempt from FBT.
• Investment Boost and motor vehicles - changes have been made to how FBT is calculated for motor vehicles where a vehicle’s tax book value includes an Investment Boost reduction.

Helping you comply with the FBT rules

If you’re unsure whether you have the right tax treatment for your employee benefits, come and talk to our team. We can review your current employee benefits and how they may be affected by the recent changes to FBT legislation and compliance.