Start with who owns the policy and who benefits
Product labels alone do not settle the tax treatment. Inland Revenue distinguishes between an employer taking out cover for an employee, an employer paying an employee-owned policy and a policy that benefits the employer itself.
Employer takes out cover for employees
IRD says employer-paid premiums for specified life, accident or medical insurance can be subject to FBT. Its guidance also covers employer-taken personal sickness or accident policies.
Employee or family member owns the policy
When the employer pays an employee-owned or family-member-owned policy, IRD says the payment is taxable employment income and PAYE applies rather than FBT.
Employer is the genuine beneficiary
IRD uses key-person insurance as an example where no FBT applies because the employer—not the employee—receives the benefit.
Employee contributes toward the benefit
Employee contributions can affect taxable value and require correct payroll and GST treatment. Do not assume a deduction or salary arrangement removes FBT without tax advice.
Budget from the employer-paid premium—not only the headline rate
Inland Revenue says the taxable value is the total premium or contribution made by the employer, calculated on a GST-inclusive basis unless the goods or services are zero-rated or exempt.
The annual attribution threshold for specified-insurance contributions is $1,000 per employee. Below that level the benefit can generally be pooled. From 1 April 2026, where all employees receive the same or a similar benefit, IRD allows employers either to attribute by dividing the total contribution by employee count or to pool at the applicable rate.
The $1,000 figure is an attribution threshold, not a general exemption from FBT.
FBT rate choices depend on the employer’s filing method
Inland Revenue publishes a 63.93% single-rate option and alternate-rate calculations that can use 49.25% or 63.93% depending on earnings, attributed benefits and pooling rules. The lowest-looking rate is not automatically available for every employee or filing period.
Ask the payroll or tax adviser to model the premium, taxable value, applicable rate, filing frequency and employee contribution together. Employee Lab can provide scheme information but does not file the employer’s FBT return.
Keep the policy and payroll evidence together
IRD’s current guide says records should include:
- The employee receiving the contribution benefit.
- The contribution amount and date.
- The insurance type, provider, policy number and date taken out.
- Evidence supporting attribution, pooling and employee contributions.
Health insurance is not automatically an exempt health and safety benefit
Inland Revenue explicitly says the unclassified-benefit health and safety exclusion does not apply to employer-paid health-insurance premiums. A benefit being health-related does not by itself remove FBT.
Confirm the full employer cost before communicating the scheme
- Identify the policy owner, beneficiary and insured employees
- Separate employer-paid and employee-paid premium components
- Confirm taxable value, attribution and rate method with a tax adviser
- Build premium and tax into the employer budget
- Set payroll records and employee communication before launch
Review the treatment when the policy, contribution structure, workforce or legislation changes. Do not reuse a prior calculation without checking its assumptions.