New Fringe Benefit Tax (FBT) exemptions for bikes and public transport have been available since April, but employers should be aware that a different tax outcome will arise if the employee is not provided with a ‘benefit’.

These exemptions include the following: 

• Employer-subsidised public transport, mainly for the purpose of travelling between home and work. The exemption covers a fare for the following transport options: bus, train, ferry, and cable car.
• The provision of a ‘self-powered or low-powered’ vehicle (e.g. bicycles, electric bicycles, scooters, electric scooters) mainly for the purpose of travelling between home and work.
• Employer contributions toward ‘vehicle-share services’ (e.g. bicycles, electric bicycles, scooters, electric scooters) used mainly for the purpose of travelling between home and work.

These exemptions do not cover transport options such as air transport, taxis, or shuttles.

The key criterion for all three new exemptions is that the benefit must be mainly for travelling between home and work. This, together with the maximum price cap on the exemption and specifications of a vehicle (in the new legislation), will rule out people buying top-tier bikes, e-bikes, or e-scooters and then using them mainly for private use. The key factor is “mainly”, meaning that a reasonable amount of personal use is acceptable. For example, a commuting bike could be used for shopping on the weekend.

Employers should be aware that these exemptions only apply to fringe benefits, there is no equivalent exemption for PAYE. Accordingly, employers need to consider how they provide any new benefits before assuming there is no tax impact. The golden rule when it comes to determining whether a fringe benefit or monetary remuneration has been provided is to consider who has the legal liability for the cost. Where the employer purchases the bike or scooter directly, then the FBT exemption should apply. However, if an employee goes to their retailer of choice and purchases a bike in their own name and claims reimbursement from their employer, then PAYE will apply, as there is no equivalent exemption.

This rule also applies to the exemption around using public transport or vehicle shares, such as Uber and other similar apps. Again, the employer must be the contracting party/have the legal obligation to pay, for FBT to apply. CA ANZ submitted on the draft legislation recommending that an equivalent exemption be introduced to create an exempt payment/allowance for the PAYE rules. The form in which the employer contribution is made should not impact the tax outcome.