Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Excluded income - Fringe benefits

CX 10: Employment-related loans

You could also call this:

“Loans from employers and their tax implications”

When your employer gives you a loan, it’s usually considered a fringe benefit. This means it’s an extra perk on top of your regular pay.

However, there are some cases where a loan from your employer isn’t counted as a fringe benefit. These include:

  • If it’s an employee share loan
  • If it’s part of an exempt employee share scheme
  • If it’s an overpayment related to your pay
  • If it’s an advance on your salary or wages, but only if the total amount you owe is $2,000 or less during the time your employer reports to the tax office, and if your job contract doesn’t say your employer has to give you the advance

Your employer provides this fringe benefit in any tax year when you owe money on the loan. This includes times when you might have to pay money in the future, or if you or someone connected to you would have to pay if something specific happens.

The rules about fringe benefits and loans are found in sections RD 25 to RD 63 of the tax law.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513350.

Topics:
Money and consumer rights > Taxes
Money and consumer rights > Banking and loans
Previous

CX 9: Subsidised transport, or

“Rules for employer-provided subsidised transport as a fringe benefit”

Next

CX 11: Employment-related loans: loans by life insurers, or

“Loans from life insurers linked to your job and insurance policy”

Part C Income
Excluded income: Fringe benefits

CX 10Employment-related loans

  1. A fringe benefit arises when an employer provides a loan to an employee.

  2. Subsection (1) does not apply to a loan made—

  3. as an employee share loan:
    1. under an exempt ESS:
      1. as an amount that is a PAYE-related overpayment:
          1. as an advance of salary and wages, if,—
            1. in the period for which the employer is required to forward a return to the Commissioner under sections RD 25 to RD 63 (which relate to fringe benefit tax), the total outstanding of such advances to the employee is no more than $2,000; and
              1. the contract of employment does not require the employer to make the advance.

              2. The employer provides a fringe benefit in a tax year in which the loan is owing. The circumstances in which a loan is owing include a case in which, under the arrangement for the loan, an amount is payable in the future, or would be payable in the future if a particular event happened, and the employee or an associated person is or would be liable to pay the amount.

              Compare
              Notes
              • Section CX 10(2)(b): amended (with effect on 29 March 2018), on , by section 26(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
              • Section CX 10(2)(bb): inserted, on , by section 143(1) (and see section 143(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
              • Section CX 10(2)(c): repealed, on , by section 16(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
              • Section CX 10 list of defined terms exempt ESS: inserted (with effect on 29 March 2018), on , by section 26(2)(a) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
              • Section CX 10 list of defined terms PAYE-related overpayment: inserted, on , by section 143(2) (and see section 143(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
              • Section CX 10 list of defined terms share purchase scheme: repealed (with effect on 29 March 2018), on , by section 26(2)(b) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
              • Section CX 10 list of defined terms superannuation fund: repealed, on , by section 16(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).