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Salary sacrifice in New Zealand

Salary sacrifice lets an employee give up part of their gross pay in return for a benefit. In NZ most of these arrangements do not save tax. Here is what does, what does not, and how the FBT exempt bike to work benefit fits in.
Explore the bike benefit for your team
North ride-2

What is a salary sacrifice scheme?

Salary sacrifice is an arrangement where an employee agrees to receive a portion of their pay as a benefit rather than as cash. The benefit is deducted from gross salary before tax, so it can change take home pay and the tax treatment of that portion.


In many countries salary sacrifice is a common way to lower income tax. In New Zealand the rules are narrower. Whether a salary sacrifice scheme saves tax depends on how the benefit itself is treated, in particular whether it attracts Fringe Benefit Tax (FBT).

Salary sacrifice and KiwiSaver in New Zealand

KiwiSaver is the most common thing people mean when they search for salary sacrifice in NZ, so it is worth being clear. You cannot reduce your taxable income by paying more into KiwiSaver. Employee contributions come out of pay that has already been taxed.

What some employers call KiwiSaver salary sacrifice is a total remuneration package. The employer contribution is described inside a single package figure rather than paid on top of cash salary. That changes how pay is presented, not how much tax is paid.

For the 2026/27 year the KiwiSaver minimums are set out below.

Contribution

Rate now (from 1 April 2026)

From 1 April 2028

Employee minimum

3.5% of gross pay

4%

Employer minimum (matched)

3.5% of gross pay

4%

Government contribution

25c per $1, up to $260.72 a year

25c per $1, up to $260.72 a year
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The one salary sacrifice that does save tax in NZ

There is a salary sacrifice arrangement in New Zealand that genuinely reduces tax, because the benefit is FBT exempt. When an employer provides a bike or e-scooter and safety gear mainly for commuting to work, and they used for commuting at least half the time, the benefit is exempt from Fringe Benefit Tax.

That exemption is what makes the Northride bike benefit different from a KiwiSaver package. The employee sacrifices part of their gross salary over 24 months, pays for the bike from pre tax income, and can save up to 25% compared with buying the same bike from taxed pay. Because it is tied to commuting, it sits inside the narrow set of salary sacrifice arrangements that IRD treats as tax free.

How the bike benefit scheme works

The employer registers for the scheme. There is no upfront cost to the business

The employee chooses a commuter bike and safety gear from a partner store.

The cost is deducted from gross salary over 24 months.

The employee commutes to work on the bike, using it for commuting at least half the time to keep the benefit FBT exempt.

See the full employee guide

Why employers offer the bike benefit

Beyond the tax saving, a commuter bike benefit supports retention, wellbeing and your sustainability targets.
Real tax efficiency

Real tax efficiency

A genuine FBT exempt salary sacrifice, unlike KiwiSaver packaging.

Lower commuting emissions

Lower commuting emissions

Cuts Scope 3 emissions from staff travelling to work.

Media

Attraction and retention

A visible benefit that costs the business nothing upfront.

From 25%+

employee saving vs taxed pay

24 months

repayment period

$0

upfront cost to employers

FBT exempt

when used mainly for commuting

Frequently asked questions

Everything you need to know about the salary sacrafice in NZ.

An arrangement where an employee gives up part of their gross pay in return for a benefit deducted before tax.
Yes, but it only saves tax where the benefit itself is tax free. Most arrangements here are remuneration packaging rather than a tax saving.
Only when the benefit is FBT exempt. The bike to work benefit is one example. KiwiSaver is not.
Usually a total remuneration package where the employer KiwiSaver contribution is shown inside a single package figure. It does not lower your income tax.
From 1 April 2026 the minimum is 3.5% of gross pay, rising to 4% from 1 April 2028.
Multiply the employee's gross pay by the current rate, then deduct ESCT. Inland Revenue's calculator gives an exact figure.
Yes. The employee sacrifices gross salary over 24 months for a commuter bike, and the benefit is FBT exempt when used mainly for commuting.
The salary sacrifice reduces the gross pay that KiwiSaver is calculated on for that portion, so confirm the detail with your payroll team.
Up to 25% compared with buying the same commuter bike from taxed income.

Offer a salary sacrifice your team will actually use

The bike to work benefit is a genuine FBT exempt salary sacrifice, with no upfront cost to your business and from 25%+ saving for staff who commute.

Get started for employers See how it works for employees