FAQ

For rental properties that make losses, owners can no longer offset those losses against other sources of income such as salary or wages, when calculating income for tax purposes.

However, owners who incur losses on their rental property can carry those forward and use them against future income or profits from that property. Owners with more than one property can also use those losses to offset income from other rental properties.

The rules apply to “residential rental property”:

• land that has a dwelling on it
• land on which the owner has arranged to build a dwelling, or
• bare land that may be used to build a dwelling under the relevant operative district plan

The rules do not apply to property that is:

• used predominantly as business premises, or farmland
• a person’s main home
• land subject to the mixed-use assets rules (such as a bach that is sometimes used privately and sometimes rented out)
• land owned by a widely held company
• accommodation provided to employees or other workers because of remote location or equivalent reason
• land identified as taxable on sale (such as land held in dealing, development, subdivision, and building businesses, and land bought with the intention of resale), provided that:

— the taxpayer notifies Inland Revenue of their rental income and expenditure on a property-by-property basis, or

— the taxpayer notifies Inland Revenue of their rental income and expenditure on a portfolio basis and all the properties within the portfolio are on revenue account.

If you own more than one rental property, under the new rules a default method of ring-fencing deductions applies on a portfolio basis. You can offset deductions for a specific rental property against income from other rental properties in your portfolio, essentially calculating your overall profit or loss across your portfolio.

When all the properties within the portfolio are sold, if they were all taxed on sale (either in the current or an earlier income year), any unused deductions at that point can be used to offset against your other income (including wages or salary). However, if any of the properties were not taxed on sale, the unused deductions remain ring-fenced.

If you don’t want to proceed on a portfolio basis, you can elect to use a property-by-property basis.

If you want to offset deductions for a specific property against future income or taxable gain from that same property, you must elect to do so. You do this by notifying Inland Revenue in your income tax return that you are applying the ring-fencing rules on a property-by-property basis. The 2019/20 income year is the first year you will be able to do this. For any property acquired after that, the election to use the property-by-property basis must be made in the relevant tax return in the year the property is purchased.

If you use the property-by-property basis, you must set out income and deductions relating to each specific property in your returns to Inland Revenue. When the property is eventually sold, and if the sale is taxed, at that point any unused deductions can be used to offset other income (including salary or wages). Note, however that unused deductions will not be available to offset against other income where they have been transferred from another property and the disposal of that property was not taxed.

Where you own multiple companies, and those companies’ assets include residential property, it will be possible to transfer rental losses from one company to another. The deduction would only be able to be used by the transferee company for residential rental income (or the sale of residential land that is taxable). Note that the companies must belong within a wholly-owned group.

Some businesses do run complex entity structures involving companies, trusts, or partnerships alongside the actual people at the heart of the business.

Specific rules deal with residential rental properties held by “interposed entities” (such as companies, trusts, partnerships, and look-through companies). In the absence of these rules a person could avoid the ring-fencing rules by using an interposed entity.

For instance, where a person takes out a loan to buy shares in a company that then buys a residential property, in theory the person could claim deductions on the interest because the loan relates to investment in shares rather than buying a rental property. The person could then offset those deductions against other income (such as salary or wages).

The interposed entity rules target deductible interest on funds borrowed to acquire a “residential land-rich entity”. A residential land-rich entity would include a close company, partnership, look-through company or trust that has residential land as more than 50% of its assets. The result is that the person borrowing funds is limited as to how much interest they can deduct. Any portion that exceeds the rental income from the property is ring-fenced and carried forward to a later income year in which the person receives residential income.

Close companies providing motor vehicles to shareholder-employees can now elect to apply the motor vehicle deduction rules and therefore not have to pay FBT on the benefit provided to shareholder-employees.

The election applies only to new motor vehicle arrangements between close companies and shareholder-employees and will continue to apply until the close company stops using the motor vehicle for business use or until the close company disposes of the motor vehicle.

Various exemptions from FBT apply. These are summarised below.

Work-related vehicles

It is important to understand that not all “business” vehicles are “work-related vehicles” for FBT purposes. To qualify as a work-related vehicle, all four of the following requirements must be met:

1. The principal design of the vehicle cannot be for carrying passengers. Vehicles that are likely to qualify include utes, light pick-up trucks, vehicles that are permanently without rear seats such as vans, station wagons, hatchbacks, panel vans, and four-wheel drives. This will also apply if the rear seats have been welded down or made unusable because of a permanent fixture such as shelving. Taxis are also included, as are minibuses.
2. The company’s name or logo must be permanently and prominently displayed on the exterior of the vehicle. Magnetic or removable signs are not acceptable.
3. The company must notify affected employees or shareholder-employees in writing that the only private use allowable is travel between home and work, or travel incidental to business travel. It is advisable that this notification be by way of letter, rather than just referring to it in an employment agreement. We can help you prepare the right documentation here.
4. The company must record checks (which must be quarterly) on each vehicle, to ensure that the restriction is being followed. For example, the company might check the logbook and petrol purchases.

If a work-related vehicle meets the four conditions above but is available for private use on certain days, such as Saturdays and Sundays, a partial exemption is available.

If a vehicle is stored at a company shareholder’s home which is also the company’s premises, there must be no private use of the vehicle at all in order to qualify for the above exemption.

If the shareholder’s home is a secondary place of business, there must be a private use restriction to qualify for the exemption. The Company would have to show that the vehicle is not available for private use.

Vehicles with a gross laden weight of more than 3,500 kilograms are not subject to FBT. This tends to cover all larger trucks and buses.

Daily exemptions apply for certain emergency calls and some out of town travel and can reduce the amount of FBT payable for vehicles otherwise available for private use.

• FBT is calculated based on either the vehicle’s cost price (including GST), or on the vehicle’s tax value
• A motor vehicle’s tax value is its value for tax depreciation purposes at the beginning of the relevant tax or income year
• Once you have chosen to use either the cost or tax value option you must continue that option until either the vehicle is sold, the vehicle lease ceases, or five years have passed
• If you are using the cost price option, FBT is calculated at 5% per quarter of the GST inclusive cost price of the motor vehicle, multiplied by 63.93%, being the FBT (using the single-rate option). Note the cost of the motor vehicle in relation to which a payment under the clean vehicle discount scheme received by you is net of the amount of the payment.
• If you are using the tax value option, FBT is calculated at 9% per quarter of the GST inclusive depreciated value of the motor vehicle, multiplied by 63.93% being the FBT (using the single-rate option)
• The FBT liability is reduced by the number of the days the vehicle was not available for private use or was exempt from FBT
• There is also a provision for FBT to be paid at 49.25%. If the employee is on a salary of less than $180,000, this is an option that should be considered. It does involve reconciliation at the end of March each year. We can provide further details on this option.
• FBT is normally payable quarterly but can be filed quarterly, annually or by income year. Filing frequency depends on the type of company you manage, the benefits you provide and how much tax you pay.

To claim that a shareholder-employee has restricted private use of a company vehicle, the company must:

• Show details of the restriction
• Confirm that the shareholder-employee is aware of the restriction
• Maintain a logbook recording both business and private mileage on a daily basis or elect to maintain a three-month test period to establish the use of a vehicle by an employee; and
• Produce a logbook on request as evidence that the restriction has been complied with

In relation to a motor vehicle, a company must decide whether it is better that the vehicle in question be owned by the company or the shareholder-employee. We can help you to decide the best course of action here.

Cryptoassets are units of value that are transferred, stored, or traded electronically and secured cryptographically. They can also be called:

• cryptocurrencies
• cryptographic assets
• digital financial assets
• digital tokens
• virtual currencies.

There is already a wide range of cryptoassets, including:

• payment tokens: a means of payment or exchange, for example Bitcoin and Litecoin. They are also called exchange tokens, intrinsic tokens or simply cryptocurrencies.
• security tokens: represent existing property or financial assets, and so mirror securities like shares or debt. They grant the holder an ownership right in an asset (eg shares, bonds, commodities, real estate, personal property, etc) and they may also be called asset tokens.
• utility tokens: these are more like traditional payment vouchers. They can be used to gain direct access to specified goods or services by granting the holder the right to obtain a product or service.

Whatever you call cryptoassets, whatever you use them for, you need some way of keeping tracking of them. This is where blockchain comes in.

A blockchain stores information electronically in digital format as a database. It can be used to maintain a secure, decentralised record of transactions. It guarantees the recorded data’s fidelity and security and generates trust without the need for a trusted third party. It’s a ledger technology.

There is new and emerging language for cryptocurrency activities and transactions, such as:

• Airdrop: when a cryptoasset is distributed for free to participants, commonly to help a cryptoasset gain attention.
• Hard fork: when a change in the protocol of a blockchain network results in a new cryptoasset diverging from the existing one.

Mining cryptoassets is a process that creates new blocks and achieves consensus on the blocks to add to the blockchain. Miners can receive cryptoasset rewards in return for verifying additions to the blockchain. Different consensus models are possible, for example:

• proof of work, using computer resources to validate transactions and maintain the blockchain transaction ledger. A proof of work miner may choose to mine cryptoassets alone, or as part of a mining pool, where miners combine their processing power to earn rewards, splitting the rewards proportionate to their individual contributions.
• proof of stake, requiring an investment in the cryptoasset itself. Users are generally required to lock a certain number of cryptoassets into the network as their stake. A pseudo-random election process selects a user to be the validator of the next block. Some people choose to take part in proof of stake mining through a third party staking-as-a-service provider or a staking pool rather than staking on their own.

Cryptoassets are generally treated as a form of property for tax purposes, and the tax treatment will depend on the characteristics and use of the cryptoasset. Note cryptoassets are not treated as financial arrangements for tax purposes (therefore only realised gains/losses are taxable, as opposed to unrealised gains or losses).

Buying and selling of cryptoassets

When cryptoassets are disposed (which includes exchanging for a different type of cryptocurrency or conversion into a traditional currency), the tax impact is the same as disposing of a traditional asset. That is, tax may arise (or entitlement to a loss) where the cryptoassets were acquired for resale, part of a profit-making scheme, or part of a business (ie regular transactions have occurred).

Where cryptoassets are bought as an investment, the same rules will apply.

Received for or used to pay for goods or services

Receiving cryptoassets as a form of payment for a business transaction is the same as receiving payment for the transaction, and the cryptoasset will need to be converted into NZD at the time of receipt and any subsequent disposal.

Mining cryptoassets

Generally, cryptoassets received from mining will be taxable income, and also any profit made on a subsequent sale or exchange of these cryptoassets will also be taxable.

Using cryptoassets for employee remuneration

Inland Revenue have released public rulings on the provision of cryptoassets by employers to employees:

• as salary, wages, and bonuses — these are subject to the PAYE rules
• as a provision of cryptoassets — subject to Fringe Benefit Tax (provided lock-in periods are meet and the employee remains employed and becomes entitled to the cryptoasset)
• as shares — if the employee is not required to pay market value for the cryptoassets issued as shares, the cryptoassets provided will be subject to the Employee Share Scheme rules.

Airdrops and hard forks

Inland Revenue have released guidance on the tax treatments of airdrops and hard forks. This states that new cryptoassets generated from either airdrops or hard forks may be taxable on either receipt, disposal, or both. Generally, no deduction will be available for the cost of acquiring the cryptoassets from an airdrop or hard fork. In some limited cases, a deduction may be available when you are taxed both on receipt and disposal.

When you do not have an income stream

You may have cryptoassets that do not provide an income stream or any other benefits while you hold them. Inland Revenue’s view is that this strongly suggests you acquired them for the purpose of selling or exchanging them. This is because the only benefit you get is when you sell or exchange those cryptoassets. Inland Revenue’s position on cryptoassets in this kind of situation is like their position on gold bullion: as with any personal property, amounts derived on the disposal of cryptoassets will be income if the cryptoassets were acquired for the dominant purpose of disposal.

As with other income tax returns for different entities, cryptoasset owners will need to complete tax returns appropriate for their business entity structure.

Before you can put your cryptoasset net income (or loss) in your tax return you need to:

• calculate the New Zealand dollar value of your cryptoasset transactions
• work out your cryptoasset income and expenses.

If you held cryptoassets that were stolen, you may be able to claim a deduction for the loss.

As for all other taxable activities, it’s important to keep good records for all your transactions with cryptoassets.

Cryptoassets are excluded from GST. This means buying and selling cryptoassets is not subject to GST.

If you receive cryptoassets as payment for goods and services you provide, GST will still need to be charged on those goods and services. You’ll need to return GST on the value in NZD of the amount of cryptoassets you receive as payment.

Non-fungible tokens (NFTs) are digital assets that represent real-world objects like art, music, in-game and videos. They are traded online, with many buyers and sellers using cryptocurrency as payment. They are similar to cryptoassets as they rely on the same programming technology and exist on distributed ledgers. However, they are not the same as cryptoassets as they are not interchangeable.

Tax may be payable on any profit made from selling NFTs depending on whether the NFT was acquired for resale, part of a profit-making scheme, or part of a business (ie regular transactions have occurred).

A NFT is classified as a service for GST, therefore selling NFTs is subject to GST. Accordingly, if your sales of goods including NFTs exceed $60,000 in a 12-month period, then GST registration will be required and GST charged on these sales.

Inland Revenue requires several things:

• that you’ve judged the debt to be “bad” because you are not likely to be paid
• you have written the debt off in your accounts
• your documentation indicates that you’ve followed a sound process

The onus is on you, the taxpayer, to demonstrate that the debt is a bad debt. Inland Revenue’s test is whether a “reasonably prudent commercial person concludes that there is no reasonable likelihood that the debt will be paid”. This takes into account:

• time: the length of time a debt has been outstanding is relevant. However, on its own it’s not enough
• effort: demonstrate that you have chased the debt. Notes on the client file documenting follow-up show the effort made trying to collect the debt
• information: note what you hear through business or personal networks. For instance you might hear the business is in trouble and has defaulted on other creditors
• matters out of your hands: it is out of your control if the debtor has died or disappeared; the business has gone into liquidation or the debt has run beyond a time limit for recovery (eg on a mortgage).

Document why you concluded there is no reasonable likelihood that the debt will be paid.

Document whatever steps you took to recover the debt, up to and including legal action. Keep it in proportion: if the debt is small, don’t spend more effort chasing it than the debt is worth. If it’s clear that even if you took further action there is still no hope to recover the debt, record what led you to think that.

The kind of debt recovery steps Inland Revenue might expect to find recorded (depending on the size of the debt and circumstances) include:

• reminder notices
• contact by telephone, mail, or email
• a reasonable period since the original due date
• a formal demand notice
• legal proceedings for debt recovery with judgment against the debtor and proceedings to enforce judgement
• correspondence and notes on steps taken, for example, to claim against the estate or from the liquidator or to trace the debtor’s whereabouts
• that you ceased calculating and charging interest and closed the account (although you might keep a tracing file open or, in the case of a partial write-off, the account may remain open)
• valuation of any security held against the debt
• sale of any seized or repossessed assets.

Whatever system your business runs — computer-based accounting software, manual account books, double-entry accounts or bookkeeping records — you need to make an entry in your system:

• recording the debt as written off
• by a person with the proper authority to do so
• in the income year or GST taxable period for which you are claiming the deduction.

Recording a provision for a likelihood that a debtor will not pay (ie a provision for doubtful debts) will not be sufficient.

What happens when you made a taxable supply, invoiced for it and returned GST for it, but then your invoice went unpaid and turned out to be a bad debt? You may be able to claim back the GST returned. Or, if it is a partially recoverable bad debt, you may be able to claim back the proportion of GST that relates to the portion of the debt you have no hope of recovering.

Provisional tax is a way of managing your income tax by paying instalments during the year to Inland Revenue.

You make progress payments on the tax due for the coming year before the final assessment of tax for a particular year is made.

If the tax to pay on your last income tax return is more than $5,000, you may have to pay provisional tax for the following year. You will not be required to pay provisional tax so long as your previous year’s RIT is $5,000 or less.

The number of provisional tax instalment payments you make depends on how you work out your provisional tax. If you’re GST registered, how often you file GST returns will determine how many provisional tax instalments you’re required to make.

Even if you are not required to pay provisional tax, you may still elect to do so.

Residual income tax is the amount of tax you have to pay, less any tax credits you may be entitled to and any PAYE deducted. RIT is used to calculate the amount of provisional tax you are required to pay.

If you are liable for provisional tax and you don’t pay, or you underpay or pay late, you may incur both penalties and use of money interest (UOMI). Some methods of calculating provisional tax will give you some protection from use of money interest.

You can use one of these options to work out your provisional tax:

1. Standard
2. Estimation
3. GST Ratio — only if you’re registered for GST
4. Accounting Income Method (AIM)

Different rules apply for different scenarios:

• For properties purchased from 27 March 2021, the bright-line test period is 10 years.
• If you already own a rental, and, the old rules apply: a 5-year bright-line test if you purchased the property on or after 29 March 2018.
• If it’s a new build, it will be subject to a 5-year bright-line test.

Under the original rules, if the property had been used as the person’s main home for over half of the relevant bright-line period, there was a complete exemption from tax under the bright-line test. Under the changes, properties acquired on or after 27 March 2021 are subject to a “change of use” rule. If a property switches from being the owner’s main home for more than 12 months, then a proportion of the sale profits of a property sold during the bright-line period will be taxed, based on the ratio of time that the property was and wasn’t used as the main home. The existing main home exemption rules continue to apply for residential property acquired on or after 29 March 2018 and before 27 March 2021.

The rules are graduated depending on when the property is acquired:

• for residential property acquired on or after 27 March 2021, taxpayers won’t be able to claim deductions for interest from 1 October 2021
• for properties acquired before 27 March 2021, interest on loans can still be claimed as an expense. From 1 October 2021–31 March 2023, the amount claimable will be reduced to 75%, reducing by 25% each following income year, until it is phased out completely from 1 April 2025.

Property developers and builders who build properties to sell will still be able to claim their interest expenses.

An exemption for new builds acquired as residential investment property and large scale “build to rent” residential developments also applies.

Residential properties used to provide short-stay accommodation, where the owner does not live in the property, are subject to the bright-line test and cannot be excluded as business premises.

Claiming deductions for home office expenses is something that comes up a lot in queries for income tax deductions.

Where self-employed person uses their home partly to conduct business activities, they are entitled to a partial deduction for the outgoings which relate to the use of the home for the work-related activities.

These include:

• Heating
• Lighting
• Rates
• Insurance
• Mortgage interest/rent
• House and contents insurance
• Repairs and maintenance
• Telephone rental

The portion of outgoings that is deductible is based on the area used for the business, expressed as a percentage of the total area of the home:

It is not necessary to set aside a specific room for business purposes, nor is it necessary for you to physically change your home to suit the business.

However, in cases where a separate room is not set aside, it may be appropriate to apportion the outgoings based on criteria such as the amount of time spent on income-earning activities as home as well as the area used. Examples of areas likely to be used for business purposes include:

• An office or office area
• A storeroom or storage area
• A workshop
• A garage or part of a garage which is used to house a business vehicle.

Instead of working out how much of your household costs to claim as business expenses, you can choose to use the square metre rate option. Inland Revenue reviews the rate each year for taxpayers to determine how much to claim for general business expenses incurred from the home. It’s a 2-step method:

• First, identify the area of the building used primarily for business purposes. Then multiply that area by the Inland Revenue rate, which excludes mortgage interest, rates or rent. The rate for the 2022–23 income year has been set at $51.05 per square metre.
• A second deduction applies for mortgage, rates or rent. These costs are calculated in proportion to the fraction of the premises that is separately identifiable and used primarily for business purposes.

This means the total deduction is calculated using the formula:

(total premises costs × business proportion) + (business square metres × square metre rate)

If you’re GST registered, you can claim a portion or percentage of the GST on the expenses. You can claim the GST content on home office expenses as you pay them — in each GST return period — or at the end of your tax year. This doesn’t include mortgage interest and residential rent as there is no GST component in these.

Along with the normal records required for income and expenses, you should keep the following:

• how the asset is used for each day of the year
• details of who used the asset, including:
  • the number of days in use by family, relatives, or associated persons
  • the person’s relationship to you (e.g., son, friend)
  • the number of days in use by people not related to you (i.e. non-associated persons)
  • the rent or hire charged to each person

• details of any repairs carried out, including the reason for repairs and whether you carried out the repairs yourself and, in the case of a holiday home, stayed at the property to do so

The mixed-use asset rules also apply to GST.

To comply with the rules, when we are getting ready to complete your tax return, we will ask you for these details. We will also ask for details of expenses incurred for the asset, including:

• the cost of advertising for tenants or clients
• the cost of repairing damages caused by tenants or clients
• in the case of holiday homes, whether any days spent in the property were to repair damage from income-earning tenants (as this counts as income earning days)
• mortgage or loan interest
• rates
• insurance

There are exemptions for both income arising from private use (which may include charging out at less than market value), and if total income from the mixed-use asset is less than $4,000. As mentioned above, if income is treated as exempt, then associated expenditure will not be deductible.

You can also claim GST on the proportion of expenses relating to the asset’s business use, if you’re GST-registered.

Make sure your records keep track of the information outlined above, to be able to calculate what is and isn’t deductible.

If you are renting out short-stay accommodation to guests for payment on a continuous or regular basis, it’s a taxable activity and you may choose to register for GST. If you earn more than $60,000 a year from your taxable activities in any 12-month period, you must register for GST.

When calculating the $60,000 threshold be aware that:

• all taxable activities are included, not just the activity providing short-stay accommodation. You could be over the threshold if you have another business as well, and
• the threshold includes supplies to “associated persons” that will be valued at market value. For instance, the family trust may own a holiday home which the trustees rent out but also allow the beneficiaries to use rent-free or for mates’ rates. These stays may be valued at market rates in calculating whether you exceed the registration threshold.

Factors which may indicate to Inland Revenue that you are conducting a taxable activity include:

• initial steps such as undertaking feasibility studies, preparing business plans and approaching local authorities for the necessary consent, if required
• whether your property is listed on relevant websites at an appropriate price
• the size and layout of your home or premises, or modifications to your home or property to enable you to provide short-stay accommodation
• whether your home or property is in a desirable location
• the time you dedicate, and can dedicate, to providing short-stay accommodation and the period you make it available for
• continuing steps taken to make it available, such as advertising and ongoing marketing, and
• future bookings.

Even if you are not conducting a taxable activity for GST purposes, there may still be income tax implications.

If you have the choice, think carefully about whether registering for GST would suit you. Once you register for GST, there are on-going requirements and when you sell your property or stop providing short-stay accommodation you will probably have GST to pay.

On-going requirements include:

• record-keeping
• invoicing
• filing GST returns for each return period, 6-monthly or 2-monthly, and
• adjustments for private and income-earning use.

You may be able to claim a GST refund back on the purchase price for a portion of your property. Balance this against the subsequent GST tax liability when the property is sold or your taxable activity ends. GST is charged on the property’s value and property usually increases in value. So, your GST tax liability when you sell or stop your activity will generally be greater than any initial benefit you receive.

If you sell the property to a buyer who is also GST registered and intends to use it for Airbnb, or some other taxable activity, it’s possible that GST output tax will be at 0% on the sale of the property. However, it’s more common that sales of residential property used for short-stay accommodation are to non-registered persons and these sales attract standard GST.

If you stop your taxable activity renting on Airbnb:

• you must notify Inland Revenue within 21 days and your registration for GST will be cancelled
• you must account for GST output tax on any goods and services that related to assets of your taxable activity immediately before you stopped being registered. The GST will be based on the open market value of your property, and
• if you have another business, you may remain registered for GST, but you will need to make a change-in-use adjustment for your property.

Your GST registration might cease where:

• the value of your taxable supplies falls below $60,000 and you ask to cancel your registration, and
• Inland Revenue investigate whether you’re carrying on a taxable activity, decide you’re not and cancel your GST registration. They may investigate if you continue to be registered but file only “nil” returns and no longer make taxable supplies.

* Note that:

• Light refreshments such as morning and afternoon teas are 100% deductible. This is usually conditional on being provided at the business premises. A coffee with an employee off-site in a café will only be 50% deductible
• However, where the business typically earns income by projects on construction or other project sites, while the worksite is not the usual business address, it is a temporary workplace and will be deemed to be provided on business premises. If a business owner buys coffees/morning tea for staff working on a building site, it’s 100% deductible
• Food and drink provided away from your business premises to share with clients and other business contacts is only 50% deductible. Coffees a business owner buys to take to a client’s premises for a meeting are 50% deductible
• Food and drink you buy for yourself is considered to be a private expense and isn’t deductible, whether you are a business owner, a self-employed person, a shareholder employee or an employee. The lunch-time pie on the go, the coffee you buy in the morning to bring into the office are not deductible

** Note that:

• Expenses incurred in providing employee accommodation not required for a staff conference are 100% deductible and not subject to the Entertainment Expense 50% limitation. However, these expenses are subject to FBT.
• If the business reimburses the employee for accommodation not required for a conference, it will be taxable to the employee under the PAYE rules. If PAYE is deducted, then no FBT will apply.
• Expenses incurred in providing golf club subscriptions and gym memberships to employees are 100% deductible and not subject to the Entertainment Expense 50% limitation. However, these expenses are subject to FBT.
• If the business reimburses for an employee’s golf club or gym membership subscription, it will be taxable to the employee under the PAYE rules. If the business pays the golf subscriptions directly or pays for a corporate subscription that any employee can use, this will be subject to FBT.

*** Note that:

• Even though the costs of a party held overseas for employees are not subject to an entertainment expense limitation (i.e. they are 100% deductible), the expenditure will be subject to FBT as the entertainment is incurred outside New Zealand.