The tax-free commute offer that could save you at least $1000 and score you a new bike
Saturday, 14 March 2026
Janine Starks is the author of www.moneytips.nz and can be contacted at moneytips.nz@gmail.com
OPINION: I’m a cyclist, and a change to New Zealand tax law has got my heart rate up to zone 3. Why? Pure excitement.
Kiwis can now buy a brand new bike of any value, tax-free from their gross salary. If you hate pedalling, don’t worry, as bus, train, ferry and cable car fares are also tax-free. Scooters, e-bikes and trikes qualify too.
Here’s the financial punch. If you take the bus to work, a 33% taxpayer saving could save $936 a year. If you buy a $5000 bike, most people will save over $1700 and get the bike for $3300. You pay it off over 12 months under the Workride tax-free scheme. This operates as a lease and the bike is formally gifted to you at no cost, once it’s paid for.
It’s financial madness not to use these new tax-free advantages. I’ve seen the power of the cycle-to-work scheme in the UK. It’s been running for 25 years, with over 2 million bikes purchased.
What does tax-free mean?
Money is taken from your gross (pre-tax) salary to pay off the bike or buy public transport. It’s known as salary sacrifice.
If you earn $100,000 a year and want a $10,000 bike (yes, some bikes really cost that), you will be left with $90,000. This means you only pay income tax, ACC levies, KiwiSaver and student loan payments on $90,000. The $10,000 remains free of income tax and deductions and is used to pay off the bike. Note for employers: there is no fringe benefit tax to pay. Changes to tax law eliminated this.
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At a technical level, some cyclists could offset 63% of the bike cost. A higher rate taxpayer will save 39% in PAYE, plus another 2% by paying ACC levies on a lower salary. Then there’s student loan payments (12%) and KiwiSaver (up to 10%), which isn’t being paid on the portion of our salary we give up to buy the bike. Totting that up gets to 63%, but it would be rare.
Aiden Smith, the co-founder of Workride, explains “most people save around 40% of a bike’s cost, by the time we account for income tax savings and other offsets”.
There’s a nifty calculator on www.workride.co.nz where you can work this out.
The tax-free public transport scheme
This is run by Extraordinary who issue a digital Mastercard on your phone, loaded with money from your gross salary (before tax is taken off).
They’re a clever financial technology company who restrict the use of the card to buses, trains, ferries and cable cars. Robyn Walker, a tax partner at Deloitte, says that “prior to the Extraordinary Mastercard being available, it was difficult to envisage an employer being able to utilise the public transport exemption at a practical level”.
She confirmed both Extraordinary and Workride have product rulings from IRD ensuring their schemes are compliant, alongside two other schemes, Electric Bikes NZ and Northride NZ.
Steven Zinsli, CEO of Extraordinary, says “someone spending $50 a week on public transport can save $18 if they’re a 33% taxpayer who contributes 3% to Kiwisaver”.
“It’s like being charged $32 and getting $50 to spend. That’s over $900 in annual savings.”
The tax-fee bike scheme
So far, Workride has sold 100,000 bikes and is on target to reach 200,000 by Christmas. Last week alone it signed up four large companies. That’s another 30,000 employees eligible for a tax-free bike in a single week.
Workride takes care of the lease contract. Employers don’t worry about the bike delivery, staff leaving, the bike going wrong or the ownership changeover.
For employers who don’t want to fund the cost of a bike, Workride has partnered with a major bank to provide financing. This adds 10% to the price of a bike, but the savings are still worthwhile for employees. Currently, it’s only available to companies with more than 100 staff and government departments, but should be offered to small and medium businesses by Christmas.
There are 263 bike shops around New Zealand which can sell tax-free bikes via Workride. Richie Stratford, the head of sales at nationwide chain Evo, says, “we sell bikes that start at $379 right up to $23,000. The average sale price in the tax-free scheme is around $4000. With Easter sales now on, people can get discounts of up to 30%, plus the tax-free advantages on top.”
Do I have to ride the bike to work?
Under the contract you sign, you agree to ride one day a week, for each day of private weekend use. The reality is, employers and the IRD aren’t formally auditing this, but it’s hardly onerous, even if you live a long distance from work and park-and-ride.
My tips
If you are close to retirement, get a tax-free bike 12 months before you give up work. Secondly, if you’re an employee-shareholder, speak to your accountant as you’ll qualify. Finally, remember you can sign up for both the bike and public transport scheme.
How do they make money?
Extraordinary charge employers $50 a year or $4.17 per month to issue the Mastercard. The vast majority don’t pass this cost onto employees. Bike shops pay Workride a confidential commission, but some may add a 5% surcharge to protect their margin if the bike is discounted in a sale.
Janine Starks is a commentator on personal finance, but is not a financial adviser. Readers should always seek specific independent financial advice appropriate to their own circumstances.