Tax on ebikes is 64%, tax on car parks is 0%

Thursday, 27 October 2022

Shutl co-founders Connor Read, left, and Aidan Smith. Their start-up is hampered by high taxes on ebikes.

Employers pay as much as 64% in fringe benefit tax if they provide an ebike for staff to commute between work and home.

In contrast, employers that provide car parking for employees pay 0% in fringe benefit taxes in most cases.

This created “perverse incentives” that discouraged the use of public transport, said Green MP Julie Anne Genter.

Driving to work results in congestion and higher emissions, she said. “It's the highest cost way to move large numbers of people around at the same time.”

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The Greens wanted fringe benefit taxes (FBT) on ebikes and cargo bikes reduced to zero, as did the co-founders of Shutl, a Christchurch start-up.

Shutl used a subscription model to put people on ebikes – about $35 a week, depending on the plan – and “we're working with employers who want to provide this for their staff,” said chief executive Connor Read.

Julie Anne Genter had persuaded Labour to lower taxes on public transport.

“Employers are paralysed… [They] want to do good for their staff and community, but the 64% tax addition blows the cost out of the water.”

Between them, Auckland and Christchurch were spending over $600 million on cycleways and bike infrastructure. More incentives were needed to get more riders on those paths, Read said.

Christchurch city councillor Sara Templeton said ebikes were “a game-changer” for cycling.

“They make hills, distance and head-winds on the way home effectively obsolete and give businesses a real choice when looking at options for employees.”

Templeton said she would “love to see e-bikes exempt from the fringe benefit tax” especially with more businesses interested in improving their green credentials.

Genter put forward a members bill last Parliament to reduce the FBT to 0% on public transport and bikes used for commuting between work and home.

The Government picked up the public transport aspects of Genter’s bill and planned to remove the FBT on fares for buses, trains, ferries, trams and cable cars starting next year. Airfares and taxis were not exempted.

Both Genter, Templeton and Read are urging people to make submissions on the bill that exempted public transport, but not ebikes. Submissions close November 2.

Shutl’s Read also called for a “bike to work scheme” similar to those in Europe, which encourage commuting by bike.

“Making it easier and more attractive for people to leave the car at home is one of the easiest things we can do to address congestion and climate change,” said Genter.

The government’s Emissions Reduction Plan has also called for more bikes and ebikes.

Despite this, Revenue Minister David Parker said there were no plans to reduce taxes on ebikes “at this stage”.

Nor was the Government considering changing the car park exemption, largely because an attempt in 2012-13 showed reform was too complex and controversial.

Fringe benefit taxes were paid by employers and were due when “people get paid with something other than cash”, said Iain Craig, a tax specialist and partner at accounting firm BDO.

They prevented employers from evading taxes by giving employees goods and services in lieu of cash.

* CORRECTION: An earlier version of this story said Shutl’s subscription model cost about $35 a month. It is about $35 a week. Amended 9.42am, Friday, October 28, 2022.