Question

Sam has been employed by a company for 20 years. To reward Sam for her long‐standing service, the company provides free flights to Sam and her husband, Jim, to travel to the Melbourne for a holiday. Jim is not an employee of the company. Explain the Fringe Benefit Tax (NZ) consequences of the provision of the free flights to the Melbourne.

Answer 1

Any employment-related gifts or prizes are treated as benefits. In the question above free flight tickets are a benfit/perk provided to Sam as an employee of the company and company had to pay tax on both.

We need to consider the amount of the benefit provided as benefits don’t qualify for fringe benefit tax if the amount falls under the minimum threshold.

Here, section CI 2(1) will apply. There is an “arrangement” between the parties, as there is a consensus between employer and Sam that involves the provision of a benefit (Flight tickets) to employees.

This is a perk, so the company must pay fringe benefit tax on value of both the tickets as Jim is related to Sam and ultimately provided to him on behalf of services provided by Sam.