Charities generally do not have to pay fringe benefit tax (FBT) on benefits provided to employees while they’re carrying out the organisation’s charitable activities. For example, if one of your employees uses your organisation’s car while doing charitable work, there will not be any FBT due on any private benefit they receive.
The one exception to this is for ‘short-term charge facilities’. These are arrangements where the charity pays for part or all of goods and services that have no connection to the organisation or its operations. This includes vouchers and store gift cards such as gas station or supermarket vouchers. If the value of the short-term charge facility is more than 5% of the employee's salary or wages in a tax year, or $300 per employee per quarter, then this will be liable for FBT.
Charitable organisations can operate a business separate from their charitable, benevolent, cultural or philanthropic purposes. If your charity does this and provides fringe benefits to one of the business’s employees, this will be liable for FBT. For example, if your charity provides a car as part of a salary package, for use with its business activities, FBT must be paid on any private benefit.
This is covered in more detail in the Charitable organisations and donee organisations guide (IR255) and Fringe benefit tax guide (IR409).
When charities are deregistered
Your charity will no longer be exempt from FBT, unless it meets other requirements to be a charity. FBT rules will apply from the earlier of two dates:
- the last day of the relevant quarter or income year the charity did not comply
- the last day of the relevant quarter or income year on the date the charity was deregistered.
If your charity met its rules until it was deregistered FBT liability will not be back dated.
If it did not meet the rules or was not eligible for an FBT exemption on other grounds, it will be liable from the first day of the quarter or income year after the date it stopped complying.