Giving an employee a leaving gift or a xmas bonus as a token of your appreciation is the New Zealand way but many employers do not realise is that if this gift exceeds $500 you will be subject to the dreaded Fringe Benefit Tax (FBT).

What is Fringe Benefit Tax?

The rules for FBT are lengthy and confusing but in essence if any employee or shareholder receives non-cash benefits of any kind in addition to their salary then you should be filing quarterly FBT returns and if these benefits exceed $300 in any quarter for an individual employee then you must pay FBT on this amount. That is just $100 per month.

What qualifies as a Fringe Benefit?

A fringe benefit is any type of non cash benefit excluding food and entertainment (unless its a voucher.)

• use of company vehicles
• discounted or free products or services
• low interest loans or payments for insurance

Who counts as an Employee?

An employee can be a normal employee or a shareholder employee and if the benefit is provided to an associated person to that employee then it is deemed to be provided to that employee.

Reference

For more confusing information you can read the FBT Guide