We’re often asked how employers can reward their team without incurring extra tax. One useful but often overlooked rule is the FBT de minimis exemption. This exemption allows employers to provide small, irregular benefits to staff without triggering fringe benefit tax (FBT). In this article, we’ll explain how the exemption works, what qualifies, and when you need to be careful.
What is the FBT de minimis exemption?
Fringe Benefit Tax (FBT) applies when an employer provides a non-cash benefit to an employee, such as vouchers, subscriptions, or discounted goods and services. However, the IRD allows an exemption for low-value, irregular benefits under what’s called the “de minimis exemption.”
In simple terms, it means you don’t have to pay FBT on minor and infrequent benefits, as long as certain thresholds are not exceeded.
How does it work?
To qualify for the de minimis exemption, you must stay within the following limits:
Per employee: The value of benefits must not exceed $300 (including GST) per quarter per employee.
For all employees: The total value of all unclassified benefits must not exceed $22,500 per annum across the entire business.
If either limit is exceeded, then all of the benefits provided — not just the excess — are subject to FBT.
The exemption applies only to unclassified benefits, which are irregular and not part of the employee’s salary or wage. Examples include gift cards, wellness-related items, or small technology accessories.
Example
Let’s say you decide to reward each of your eight employees with a $250 contribution toward an annual gym membership as part of a wellness initiative. A few months later, you also give each of them a $40 prepaid phone voucher for personal use.
Each employee has received $290 of benefits within the quarter — under the $300 per-person limit. Across the team, the total cost is $2,320 — well under the $22,500 annual threshold.
Result: No FBT applies. These benefits qualify for the de minimis exemption because they are of low value and not provided regularly.
However, if you had instead given each employee a $350 fitness watch, this would breach the $300 per employee limit. FBT would apply to the entire value of the watch, not just the portion above the threshold.
Risks and traps to avoid
Regular benefits: If a benefit is given frequently (e.g. monthly or as part of a pattern), the exemption won’t apply — even if it’s under $300.
Lack of tracking: Without clear records, it’s easy to unintentionally breach the limits.
Classified benefits: Certain benefits, like private use of a company vehicle, are excluded from this exemption and have separate FBT rules.
Costs and compliance
If you exceed the thresholds, FBT applies, potentially at a marginal rate of up to 63.93%, depending on the employee’s remuneration. That makes planning and record-keeping essential.
Summary
The de minimis exemption is a smart way to give meaningful, one-off perks to your team without triggering tax. But it comes with strict limits — and exceeding them can result in unexpected costs. At Doyle Accountants, we’re here to help you make the most of these exemptions while staying fully compliant.
If you’re unsure whether your benefits qualify, get in touch with us for a quick review.
Contact Us
Contact Us today to discuss on 07 827 9130 or email us. Our office is in Cambridge, NZ, but distance is no problem. We have many international and national clients.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
