Employers offering transport perks warned of tax rules

Source: Radio New Zealand

Any businesses planning to offer extra support for their staff facing fuel cost rises will need to consider the tax implications.

Fuel prices have risen sharply in the past month as conflict in Iran has put pressure on oil supplies.

The price of 91 is now more than $3.30 a litre on average across the country, and forecast to rise further.

That adds to the cost of commuting – the Public Service Association earlier called for employers to allow staff to work from home to help offset the cost.

Deloitte tax partner Robyn Walker said any form of payment from an employer to an employee would generally be taxable through the PAYE system – even if it was a short-term fix for the petrol problem.

If it was offered in the form of goods or services, that could trigger fringe benefit tax.

But she said there were some exceptions for transport, which employers could consider.

The fringe benefit tax legislation has an exemption for ebikes, bikes, scooters and escooters provided by employers and used for commuting to work.

That means that as long as the employee is intending to use the bike mostly for commuting, it can be provided without needing to pay any fringe benefit tax (FBT).

She said there could also be significant benefits for employees taking a “salary sacrifice” arrangement.

This means their income is reduced by an amount equal to the cost of the bike. Because the cost of the bike was taken out of pre-tax income the final impact on the employee would be lower than if the bike was paid for out of after-tax income.

She said it could help someone afford a bike they might not otherwise be able to purchase. Some providers such as WorkRide and Northride have set up systems to streamline this process.

Another option is Extraordinary, which allows employers to offer public transport benefits either by salary sacrifice or as part of a total remuneration package, without attracting FBT.

This also has the potential to make public transport cheaper for employees.

Walker said employers could also start getting more claims for mileage from employees travelling for work in their own vehicles, where previously they might not have thought the administration was worth it.

“There are some quite detailed rules around how this works and generally ‘home to work’ travel can’t be reimbursed tax-free, but travel from home to a client – in excess of normal travel distances, or from work to a client is able to be paid tax exempt.

“Inland Revenue issues new reimbursement rates each year, which are based on historic costs. These are essentially a ‘safe harbour’, whereby they are comfortable that reimbursement at that level is reasonable; employers are not bound to use those rates, so could opt to pay a higher amount while fuel costs are high. This would need to be supported with some calculations to explain why the amount paid is reasonable.”

At present, the rate for a petrol car is $1.17 per kilometre.

“It is technically possible for an employer to provide tax-free allowances for employee transport costs in some limited circumstances. This exemption is targeted at scenarios where an employee’s commuting costs are more than what would ordinarily be expected – for example, if the employer operates in a remote location or if the location isn’t serviced by public transport and/or the employee is working hours where public transport isn’t available.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

LiveNews: https://livenews.co.nz/2026/03/24/employers-offering-transport-perks-warned-of-tax-rules/