The New Zealand government introduced an exemption from Fringe Benefit Tax (FBT) for employers providing e-bikes, scooters, and public transport to employees, aimed at promoting sustainable and environmentally friendly commuting options. Here is how this exemption and the scheme work:
FBT Exemption for E-bikes:
-
Legislation: Effective from April 1, 2023, the government amended the taxation law to exempt e-bikes, scooters, and public transport from FBT when provided by employers for the primary purpose of commuting between home and work. This was part of a broader initiative to support low-emission transport options and reduce carbon footprints.
-
Criteria for Exemption: The key criterion for this exemption is that the e-bike or scooter must be mainly used for travel between the employee's home and workplace. This allows for some personal use but emphasizes commuting as the primary purpose. Employers do not need to monitor how the e-bike is used post-provision, but the initial intent should be for commuting.
-
How the Scheme Operates:
-
Purchase and Provision: Employers can purchase e-bikes directly and provide them to employees. The exemption applies only if the employer is the legal purchaser, not if the employee buys the bike and seeks reimbursement. This means that any reimbursement by the employer would be subject to PAYE, not eligible for the FBT exemption.
- Salary Sacrifice: Many employers opt for a salary sacrifice arrangement where an employee agrees to a deduction from their pre-tax salary to effectively pay for the e-bike over time. This method reduces the employee's taxable income, thereby providing tax benefits. The salary sacrifice must be valid, meaning the employee must not have the contractual right to receive that part of their salary in cash instead of the e-bike.
- Financial Implications: For employees, this can lead to significant savings since the cost of the e-bike is offset by the tax advantages of salary sacrifice. The employer might also benefit from tax deductions on the expenses. However, employers need to ensure these schemes are correctly set up to comply with tax laws to avoid potential FBT liabilities.
-
Administrative Considerations: Employers need to consider logistics like insurance, maintenance, and the potential for private use. Some might choose to own a fleet of e-bikes, while others might facilitate purchase through salary sacrifice without retaining ownership.
-
-
Employee Benefits: Beyond financial benefits, this scheme encourages healthier lifestyles, reduces traffic congestion, and lowers carbon emissions, aligning with national environmental goals.
- Support and Resources: There are various platforms and resources available, including from NZ Transport Agency Waka Kotahi, which provide guidance on implementing these schemes effectively, although they might not be fully updated to reflect the new FBT exemptions.
-
Public Transport and Other Options: Similar exemptions apply to public transport and vehicle-share services for commuting, which work under similar principles, promoting sustainable transport options across different modes.
By leveraging these exemptions, employers can offer an attractive benefit that not only supports environmental sustainability but also enhances employee health and reduces commuting costs, making it a win-win situation for both parties.