If FBT came off workplace insurance, your household would gain your own marginal tax rate
Source: FSC, Why removing FBT on workplace insurance stacks up
NZIER modelled $198 million of net economic benefit for the country. Nobody published the household number. It is 11.73 cents per dollar of premium at the bottom of the income scale and 63.93 cents at the top, and for most group schemes it is a flat 49.25 cents.
By Henry Smith · Premiums · 2026-08-12
Removing Fringe Benefit Tax from employer-provided insurance would hand a household a gain equal to its own marginal tax rate on the value of the premium. That is 11.73 cents per dollar of cover for an employee earning under $15,600, 21.21 cents up to $53,500, 42.86 cents up to $78,100, 49.25 cents up to $180,000 and 63.93 cents above it, using Inland Revenue's 2026-year FBT rates (Inland Revenue, retrieved 20 August 2026). For most group schemes the answer is simpler still, and it is a flat 49.25 cents regardless of what anyone earns.
What the FSC published
On 12 August 2026 the Financial Services Council released economic modelling by NZIER, which the FSC commissioned, on removing FBT from employer-provided life, health, trauma, disability and income protection insurance. NZIER found the change "could deliver up to $198 million in net economic benefits", and that "for every dollar of foregone revenue, New Zealand could expect between $1.74 and $1.94 in wider economic benefits". It estimates the change "could extend group health insurance coverage to around 200,000 additional Kiwis" (FSC, 12 August 2026, retrieved 20 August 2026).
On the health system, NZIER estimates "up to 10,459 procedures could move from public waiting lists into private care, saving patients a combined 471,630 waiting days", which the FSC describes as "14 per cent of the relevant Health NZ waitlist and a 52.6 per cent reduction in expected waiting days for those patients" (same source).
The FSC also published polling: "68% of New Zealanders support removing FBT on employer-provided health and life insurance". The poll was run by Curia, commissioned by the FSC, conducted between 1 and 4 August 2026 with 1,000 respondents weighted by gender, age and area, with a maximum sampling error of plus or minus 3.1% at the 95% confidence level (FSC, 12 August 2026, retrieved 20 August 2026).
The FSC is an industry association. Its members are the life, health and income insurers and fund managers who would sell the additional cover, the modelling was commissioned by it, and the polling was commissioned by it. None of that makes the numbers wrong. It does mean they are advocacy, and should be read as such.
What an employee would actually gain, by income band
FBT is paid by the employer, not by you. Nothing appears on your payslip and nothing would disappear from it. So the household question is not "what would I stop paying" but "what does the same employer outlay buy".
Inland Revenue publishes a single FBT rate of 63.93% and a set of alternate rates that step with the employee's total remuneration (Inland Revenue, retrieved 20 August 2026). Those alternate rates are not arbitrary. Each one is the exact gross-up of a personal income tax rate, and each threshold is the exact after-tax equivalent of an income tax threshold. Tax on $180,000 is $49,277.50, which leaves $130,722.50, and the top FBT band starts at $130,724. Tax on $78,100 is $15,650.50, which leaves $62,449.50, and the 49.25% band starts at $62,450. The FBT scale is the income tax scale seen from the other side.
Chart: QuoteHub calculation from Inland Revenue's published FBT and income tax rates, retrieved 20 August 2026. Illustration of the tax arithmetic only, not a quote and not tax advice.
| Employee gross income | Marginal income tax rate | FBT rate | FBT on a $1,000 premium | FBT on a $1,500 premium |
|---|---|---|---|---|
| Up to $15,600 | 10.5% | 11.73% | $117.30 | $175.95 |
| $15,601 to $53,500 | 17.5% | 21.21% | $212.10 | $318.15 |
| $53,501 to $78,100 | 30% | 42.86% | $428.60 | $642.90 |
| $78,101 to $180,000 | 33% | 49.25% | $492.50 | $738.75 |
| $180,001 and over | 39% | 63.93% | $639.30 | $958.95 |
QuoteHub arithmetic on Inland Revenue's 2026-year rates, retrieved 20 August 2026. Assumes the benefit sits wholly within one band and the employer uses the full alternate rate calculation. The $1,000 and $1,500 premiums are illustrations, not published averages.
Work one case through. An employee on $90,000 pays $19,577.50 of income tax, leaving net income of $70,422.50. Add a $1,500 health premium the employer funds and total remuneration is $71,922.50, inside the 49.25% band, so the employer's FBT is $738.75 and its total outlay is $2,238.75. Paying that same $2,238.75 as salary instead would leave $1,500.06 in the employee's hand after tax at 33%. The two routes cost the employer the same to within six cents, which is the point our guide to employer sponsored health insurance in NZ makes at the top rate.
Remove FBT and that equivalence breaks in one direction only. The same $2,238.75 now buys $2,238.75 of premium instead of the illustrative $1,500 used above (an assumed figure, not a published average or a QuoteHub quote), a 49.25% uplift, or the employer keeps $738.75. That is the household number, and it is larger the more you earn.
Most group schemes would get the flat rate, not the band rate
There is a rule that changes who this actually helps, and it is not in the FSC's material. Inland Revenue attributes a specified insurance premium to an individual employee once it exceeds $1,000 a year, but adds that you "can pool subsidised transport and specified insurance premiums fringe benefits that are over the annual threshold if all employees have the same or similar entitlement" (Inland Revenue, retrieved 20 August 2026). Pooled benefits are taxed at 49.25% for all employees other than major shareholder-employees.
A typical workplace scheme offers the same plan on the same terms to everyone, which is exactly the condition for pooling. So the realistic answer for most schemes is a flat 49.25% of premium, and removing FBT would be worth 49.25 cents in the dollar to a cleaner and to a chief executive alike. The stepped table above is what applies where an employer attributes instead.
The $198 million is the top of a range, not the number
Two pieces of arithmetic the source did not do.
The first is the net benefit. The NZIER report puts total economic benefits at $408.7 million against forgone revenue of between $210.7 million and $234.5 million, which is "a net benefit of between $174.3 million and $198 million" (Insurance Business NZ, 12 August 2026, retrieved 20 August 2026). We could only reach those underlying figures through that secondary outlet, not the FSC's own page. Check them against the FSC's own ratio and they hold: $408.7m divided by $210.7m is 1.94, and divided by $234.5m is 1.74. The FSC's headline of "up to $198 million" is the most favourable pairing in the range. At the other end the net benefit is $24 million lower.
The second is the waiting list. Divide 471,630 waiting days by 10,459 procedures and each patient moved off the list saves 45.1 days. If that is a 52.6% reduction in their expected wait, the implied wait before the change is 85.7 days and after it 40.6 days. And dividing the fiscal cost by the 201,408 additional policyholders the report projects gives $1,046 to $1,164 of forgone revenue per newly covered person per year, on the crude assumption that none of the cost is attributable to people already covered. It is a crude figure precisely because most of the cost is.
What it means for your cover
Nothing, yet, and probably nothing this renewal. FBT removal is a proposal with documented opposition inside government. Inland Revenue has advised that an exemption would "materially erode the integrity of the broad personal income tax base and create equity concerns", and Budget 2026's FBT changes addressed motor vehicles and left insurance premiums alone (Insurance Business NZ, 12 August 2026, retrieved 20 August 2026).
If it did happen, the saving lands on your employer's tax bill, not your bank account. Whether it reaches you depends entirely on whether the employer spends it on more cover, more staff covered, or on something else. There is no mechanism in the proposal that forces the first two.
The honest limits
We could not source a published average group health premium in New Zealand, so the dollar figures in the table are a rate applied to round illustrative premiums rather than a typical bill. No New Zealand insurer publishes what an employer pays per employee on a group scheme.
We have not read the NZIER report itself. The FSC's download sits behind a member gate, so the $408.7 million benefit, the $210.7 million to $234.5 million cost and the 201,408 policyholder projection reach us only through Insurance Business NZ's reporting of it. The FSC's own page publishes the net figure and the ratio but not the components.
Real FBT calculations involve attributed and non-attributed benefits, quarterly, annual or income-year filing and a choice between four calculation options, so an employer's actual cost depends on which option it uses. This is not tax advice.
Sources
- FSC, Why removing FBT on workplace insurance stacks up
- FSC, Kiwis want a long-term plan for KiwiSaver
- Inland Revenue, Full alternate rate calculations for fringe benefit tax
- Inland Revenue, Calculation options and rates for fringe benefit tax
- Inland Revenue, Attributing fringe benefits to individual employees
- Insurance Business NZ, Group insurance FBT proposal faces documented government opposition
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Explore related pages: Life Insurance, Income Protection, Health Insurance, Trauma Insurance, Referral.