What are fringe benefits - and what are the tax implications?

A key part of attracting new talent to your business is offering a good benefits package. Not all benefits are financial. As part of your package, you may choose to offer what’s known as ‘fringe benefits’ to your employees. But what are fringe benefits and what are the potential implications of offering them?

What are fringe benefits?

Fringe benefits are non-monetary perks that you can offer to employees alongside their standard salary or wages. Examples of these kinds of benefits could include company cars, private health insurance, gym memberships, or free meals. A healthy benefits package can be used to attract and retain talent, but these benefits often trigger specific tax liabilities for the business.

What are the tax implications for your employees?

For most employees, the benefit itself is usually tax-free. You, as the employer, pay any applicable fringe benefits tax that is due. However, benefits over a certain threshold may be required to be reported on the employee’s payslip. This can boost their perceived income and may affect any means-tested obligations, like student loan repayments, or government benefits.

As an employer, you will usually pay fringe benefits tax on the benefits you offer to employees. Offering fringe benefits typically makes the perk partially or wholly tax-deductible as a business expense for your company, and you can often reclaim some of the associated FBT tax.

Helping you get to grips with fringe benefits tax

If you’re unsure about the tax implications of offering fringe benefits, come and talk to our team. We can explain the key tax impacts and the best way to structure your benefits package. Speak with your Client Manager, or get in touch info@bfa.co.nz