The Business Advisory Blog

What this means 

For employers, these changes may affect how they tax some benefits provided to employees. In some cases, employers now have more flexibility to choose whether to apply FBT or treat a benefit as employment income with PAYE deducted.

Employers may want to review how they currently treat motor vehicles, gift cards and certain employee reimbursements to make sure they’re applying the rules that best fit the situation.

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.

• Applies from 16 April 2025.

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.

• Applies from 1 April 2026.

Health and safety equipment

Unbranded personal protective equipment is exempt from FBT.

• Applies from 1 April 2008.

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. The taxable benefit is calculated using the following rates:

• 10.35% (GST inclusive) or 11.90% (GST exclusive) for quarterly returns
• 41.4% (GST inclusive) or 47.61% (GST exclusive) for income year or annual returns.

$7,317 is the minimum tax book value for Investment Boost vehicles.

• Applies from 1 April 2026.

Looking After Your Tax