Free NZ salary packaging calculator. FBT cost to the employer and net benefit to the employee on fringe benefits such as car use or low-interest loans.
FBT cost to the employer and net value of a packaged benefit to the employee.
Net employee benefit value
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FBT payable by employer
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Total employer cost
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FBT rate applied
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Equivalent gross salary saving
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Your breakdown
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Why the single FBT rate is 49.25%
The single rate of 49.25% looks surprisingly high, but there is a logic to it. FBT is payable on the GST-inclusive value of the benefit, and the rate is designed to be equivalent to the top marginal income tax rate of 39% applied on a gross-up basis. If an employee in the top bracket received cash instead of a benefit, they would pay 39% tax on the grossed-up value. The single rate of 49.25% produces the same effective tax outcome on the benefit value. For employees in lower brackets, the single rate over-taxes their benefits, which is why the alternate-rate attribution method exists as an alternative for employers who want to align FBT more precisely to each employee’s tax position.
Is salary packaging worth it for the employee?
From the employee’s perspective, the net benefit value is simply the market value of the benefit, because the employee pays no personal tax on a fringe benefit. A company car worth $15,000 per year is $15,000 of real value to the employee. If the same employee had received $15,000 of additional salary, they would pay income tax at their marginal rate on it. At a 33% rate, $15,000 gross becomes $10,050 net. So the benefit is worth $4,950 more to the employee than the equivalent cash, provided they actually want the benefit being packaged. The packaging is most valuable for employees with high marginal rates and benefits they genuinely need.
The employer cost equation
Employers need to compare the cost of providing a benefit plus FBT against the cost of giving an equivalent salary increase plus PAYE employer obligations. A benefit costing $15,000 with FBT at 49.25% totals $22,388 for the employer. An equivalent gross salary increase of $22,388 would cost the employer $22,388 plus employer KiwiSaver at 3%, so $23,060. In this simplified comparison, the benefit route is slightly cheaper for the employer. However, FBT is also deductible at 28%, which reduces the net cost further. The detailed calculation should also account for ACC and any relevant workplace insurance adjustments.
Frequently asked questions
What is salary packaging in NZ?
Salary packaging means structuring part of a remuneration package as non-cash benefits rather than salary. In New Zealand, common packaged benefits include a company vehicle, low-interest loans, and subsidised goods or services. The employer provides the benefit instead of an equivalent gross salary increase, and Fringe Benefit Tax applies to the employer on the taxable value of the benefit.
How does FBT reduce the attractiveness of salary packaging?
Because FBT at 49.25% is payable by the employer on the GST-inclusive value of the benefit, a $10,000 benefit costs the employer $14,925 in total (benefit plus FBT). The employee receives a benefit worth $10,000 but pays no personal tax on it, so the after-tax value to the employee is $10,000 regardless of their marginal rate. Whether packaging is worth it depends on whether the employee marginal rate is high enough that the benefit is worth more to them than the equivalent cash salary net of income tax.
When does the alternate-rate method lower FBT?
The alternate-rate (attribution) method lets the employer calculate FBT at a rate aligned to each employee marginal rate rather than the 49.25% single rate. For employees in the 30% or lower brackets, attributed FBT is much lower than the single rate. For employees in the top 39% bracket, the alternate-rate FBT is still lower than 49.25% because 49.25% was set to cover the grossed-up top rate plus FBT on FBT. The trade-off is additional year-end attribution calculations per employee.
Are any salary-packaged benefits exempt from FBT?
Yes. Employer contributions to KiwiSaver are not subject to FBT; they are covered by ESCT. Work-related vehicles that genuinely meet the private-use restriction are exempt on qualifying days. Small de minimis benefits (unclassified benefits under $300 per employee per quarter and under $22,500 total per year across all employees) are also exempt. On-site car parking in Auckland or Wellington was a commonly claimed exempt benefit until the rules were tightened.