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Inland Revenue

Tax Policy

Clarifying that vouchers are a "short-term charge facility"

Issue: Vouchers should not be included in the definition of “short-term charge facility”


(Maxxia, KPMG, Wilson Parking)

Vouchers simply enable employers to provide employees with goods and services in a more cost-effective manner. If the provision of the underlying good is not subject to fringe benefit tax, there is no policy reason for provision of a voucher to be either. The removal of an efficient mechanism to administer the fringe benefit tax exemption is counterproductive and harmful to the charitable sector. (Maxxia)

Officials should look at the Australian model where not-for-profit organisations enjoy the continued support of the Government through a fringe benefit tax exemption, with “per-employee” limits. (Maxxia)

While we understand the tax and social policy rationales for the inclusion of vouchers in family scheme income, this may impose an additional cost on a charity from having to fund the tax on behalf of employees. This appears inconsistent with the Government’s other public policy objectives. (KPMG)

Charitable organisations should not have to pay FBT on the value of vouchers provided to employees. Vouchers given to employees of charitable organisations recognise the efforts of individuals helping the less well off. The new rules also impose significant administrative burdens on charitable organisations. (Wilson Parking)


Although the exemption from fringe benefit tax afforded to charitable organisations means that charitable organisations are not generally required to pay fringe benefit tax on goods and services provided to employees, there is a long-standing exclusion for benefits provided by way of short-term charge facilities when those benefits exceed 5 percent of an employee’s salary or wages for the tax year. The bill proposes that this cap be amended to the lower of $1,200 or 5 percent of salary or wages.

In recent years, various arrangements which aim to expand the intended scope of the FBT exemption for non-cash benefits provided to employees of charitable organisations have been marketed to some charitable organisations. The arrangements, such as the provision of vouchers, have aimed to cover an employee’s normal everyday living expenses such as groceries and petrol. In these circumstances, vouchers can provide a readily substitutable alternative to salary and wages.

A key principle of tax policy is horizontal equity – ideally a tax should apply equally to people on the same effective income. Not requiring charitable organisations to pay FBT on vouchers (or other short-term charge facilities) provided to employees, could encourage structuring such that employees received minimal monetary remuneration, and received a large portion of their salary package as non-monetary remuneration, including by way of vouchers.

Officials note that these arrangements could be avoidance in some situations. Officials are of the view that it is appropriate to clarify the definition of “short-term charge facility” to express that vouchers are a form of short-term charge facility, and so are subject to the modified cap.


That the submissions be declined.

Issue: The current cap on FBT-exempt short term charge facility benefits of up to 5 percent of salary or wages should not be amended


(Simpson Grierson)

We oppose the proposal to change the cap on the FBT exemption in respect of the provision of short-term charge facilities to the lesser of $1,200 or 5 percent of the employee’s salary or wages.

The proposed $1,200 cap is very low. It does not give sufficient weight to the positive assistance that the more generous, existing cap gives to charitable organisations, in terms of enabling them to attract and retain staff by providing a mixture of monetary and non-monetary remuneration to employees.

Alternatively, if it is considered necessary to supplement the cap with a specific value threshold, that threshold should be more generous, for example $3,000 rather than $1,200.


As noted earlier, a key principle of tax policy is horizontal equity – ideally a tax should apply equally to people on the same effective income. By allowing employees of charitable organisations to receive valuable salary substitutes, such as vouchers, without their being taxed, employees would receive a tax saving over employees of other entities. This would create inequity between employees of different types of entities. A $1,200 cap is equivalent to 5 percent of income at $24,000, which officials consider provides charitable organisations with sufficient flexibility while precluding salary substitution.


That the submission be declined.

Issue: The wording of section CX 25 should be clarified


(Corporate Taxpayers Group, Ernst & Young, Simpson Grierson, Deloitte)

These submissions consider it is unclear how vouchers are included in the definition of “short-term charge facility” by the proposed wording changes to section CX 25.

It’s not intuitive that there is a “liability” on the employer when they have provided a voucher, as required by the wording of the section. (Corporate Taxpayers Group, Deloitte)

It should be clarified whether this definition includes electronic cards which are given to employees with money pre-loaded onto them, as the employer will have provided payment before the liability to pay for goods and services obtained by an employee arises. (Ernst & Young)

Instead, a separate limb should be included in the definition of “short-term charge facility” specifically referencing the provision of vouchers (or equivalent benefit) to an employee that can be redeemed by the employee to acquire any goods or services. (Simpson Grierson)


The issue hinges on whether the employer has a liability to pay for the goods or services at the same time as the voucher or other short-term charge facility is used by the employee. The policy intent is that these two events need not happen concurrently. For example, the liability could occur beforehand, which would cover electronic cards with money preloaded onto them. Officials will instruct the drafter to consider if the wording could be clearer in this area.


That the submissions be noted.