In today's rapidly evolving work environment, businesses are constantly searching for effective, meaningful ways to support their employees while also maintaining financial prudence. New Zealand’s public transport allowance is a powerful way to reduce commuting costs for employees while being advantageous to employers and their bottom line. Let’s explore how leveraging the public transport fringe benefits tax (FBT) exemption can be a strategic, winning move for your company.

Understanding the Public Transport FBT Exemption

Under section CX19C of the Income Tax Act, employers can subsidise their employees’ public transport fares—such as those for buses, trains, ferries, and cable cars—without incurring additional fringe benefits tax. This provision empowers companies to support their workforce while remaining compliant with tax regulations.

So, what does section CX19C say?

Essentially, it states that if an employer covers the cost of an employee's commute between home and work using public transport, that subsidy is not considered a fringe benefit, provided it meets specific criteria. According to the act, a “public transport fare” refers to the money paid for journeys on transportation available to the public, which charges set fares.

Why This Matters for Employers

The implications of this exemption are profound. For employers, it means an opportunity to enhance their employee benefits package without the additional tax burden. By supporting public transport, businesses can:

1. Drive Sustainability: Public transport helps reduce the carbon footprint. With environmental concerns being paramount to employees and businesses alike, those that promote sustainable practices can enhance their corporate social responsibility profile.
2. Alleviate Economic Pressure: Many New Zealanders have some level of financial strain, and commuting costs are often an unavoidable contributor. By subsidising public transport, employers can help ease this burden, helping employees feel more satisfactied and loyal to your organisation.
3. Facilitate Return to the Office: As the majority of organisations transition back to in-office work, providing a public transport allowance can help remove the financial objections to this transition. It also shows that the company values their team’s time and finances, as is proactively willing to support them in overcoming commuting hurdles.

Implementing the Public Transport Allowance

How can your organisation effectively distribute this benefit? Here’s a straightforward approach:

• Controllable Payment Cards: Our Extraordinary solution provides employees with a controllable payment card to be used for public transportation costs, whatever that looks like for each person. This card can be funded according to your specifications—whether weekly, fortnightly, monthly, or on a quarterly or annual basis. It allows employees to manage their transportation costs seamlessly without the reimbursement stress.
• Restricted Use: To ensure compliance with the FBT exemption, we have isolated specific ID numbers for the online payment processors linked to various public transport operators across New Zealand, such as Metro, BeeCard, Snapper, and ATHop. This means the funds allocated can only be used for public transport, ensuring the benefit is used appropriately (and you reap all the tax benefits).
• Comprehensive Reporting: Our platform provides detailed reporting at the transactional level. Employers can view each employee's utilisation, the specific public transport operator they used, when the transaction occurred, and the amount spent. This transparency not only aids in compliance but also helps organisations understand how their benefits are being utilised.

As a reminder, an employee card can only transact within the rules/restrictions (smart controls) and up to the amount of spend the company makes available. Funds are always owned and controlled by the provisioning organisation (you). 

An Extraordinary solution

As we expand our capabilities beyond traditional health offerings, this public transport allowance becomes an integral part of our new suite of solutions designed to enhance the employee experience. With our Extraordinary platform, your employees can access public transport subsidies and myriad other benefits through a single, user-friendly app. This means less administrative hassle and more focus on what really matters—supporting your team in the ways that are meaningful to them. By integrating these benefits into one cohesive system, we empower every employee to feel valued, trusted, and in control of their financial wellbeing.

Disclaimer: This is not tax advice. We always recommend seeking independent advice. You can find more information about CX19C of the Income Tax Act here.

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