Sök
Get started
Search icon
Search button icon

Fringe Benefit Tax and the Bike Benefit Exemption

How fringe benefit tax works for New Zealand employers, which benefits are exempt, and how the bike benefit lets your team ride to work with no FBT to pay.
See how the bike benefit works
North ride-2

What is fringe benefit tax?

Fringe benefit tax, or FBT, is the tax an employer pays when it gives an employee a benefit that is not cash, either instead of salary or on top of it. The employer pays FBT to Inland Revenue and it sits separately from the employee income tax.

The reason FBT exists is to keep the tax system fair. Without it, an employer could replace taxable wages with perks and cut the tax that would otherwise be collected through PAYE. FBT closes that gap by taxing the value of the benefit in the hands of the employer.

How FBT works

Who pays and when

The employer is liable for FBT, not the employee, and nothing is taken from the employee pay. Returns are filed quarterly, over an income year, or annually. The annual return covers the year from 1 April to 31 March and is due on 31 May.

How it is charged

FBT is worked out on the taxable value of each benefit. Employers apply either the single rate of 63.93% or the alternate rate of 49.25%, depending on the method they choose.

What counts as a fringe benefit

Common fringe benefits include a motor vehicle available for private use, low interest loans, subsidised goods or services, and employer paid insurance. The rules are set out in the Income Tax Act 2007.

63.93%

Single FBT rate

49.25%

Alternate FBT rate

1 April 2023

Bike exemption in force

$0 FBT

On qualifying commuter bikes

FBT exemptions

Not every benefit is caught by FBT. The law lists a number of exemptions, and several were added to support low emissions travel to work. Employer paid public transport for the trip between home and work is exempt, and so are bikes and scooters provided mainly for commuting.

 

The bike benefit exemption

The exemption that matters most for a bike benefit came into force on 1 April 2023. From that date, a bike, an electric bike, a scooter or an electric scooter that an employer provides to an employee is not treated as a fringe benefit, as long as it is provided for the main purpose of the employee travelling between home and work.

This is why a bike benefit has to be built around commuting. The commute is the legal test for the exemption, which is why the scheme is about getting to work rather than general or leisure riding.

What the exemption means in practice 

  • The commute is the test - The bike must be provided mainly for travel between home and work. That intended use is what removes the FBT.

  • It covers the bike, not the extras - The exemption applies to the value of the bike itself. Accessories such as helmets and wet weather gear are not covered.

  • In force since 1 April 2023 - The exemption was added to the Income Tax Act 2007 to encourage low emissions transport to work.
  • No fixed price cap today - The law allows a maximum bike value to be set, but no cap has been set to date.

Why this matters for the bike benefit

Because a commuter bike provided this way is exempt from FBT, the value your employee receives is not taxed as a benefit. Paired with a salary sacrifice arrangement, where the cost is spread over 24 months from pay, this is what lets an employee get a bike from 25%+ less than buying it outright.

For the full detail on repayments, ownership and what employees can choose, see how the bike benefit works for employees.

Frequently asked questions

Everything you need to know about the FBT & Bike Benefit Exemptions in NZ.

Fringe benefit tax is the tax an employer pays to Inland Revenue when it gives an employee a benefit that is not cash. It is separate from the employee income tax and is not taken from their pay.
The employer pays FBT. Nothing is deducted from the employee wages for it.
Employers apply either the single rate of 63.93% or the alternate rate of 49.25%, depending on the calculation method they use.
An FBT exemption is a benefit that the law says is not a fringe benefit. When a benefit is exempt, no FBT is payable on it.
Yes. Since 1 April 2023, a bike, electric bike, scooter or electric scooter provided by an employer is exempt from FBT if it is provided mainly for the employee to travel between home and work.
No, The bike just needs to be used mainly for getting to and from work (more than 50% of the time). Using it for the odd other trip or on the weekend is fine and does not remove the exemption.
The law allows a maximum bike value to be set, but no cap has been set to date.
Yes! Because the bike is exempt from FBT, its value is not taxed as a benefit. Due to the bike being salary sacrificed over 24 months, the employee will pay a reduced amount of PAYE -  this is how an employee can get a bike from 25%+ less than the retail price.

Give your team a tax friendly way to ride to work

See how the bike benefit works, or talk to our team about setting it up for your workplace.

See how it works for employers Talk to our team