The case for removing FBT on group insurance schemes

A report for the Financial Services Council.

Employer-based insurance can give working people faster access to health and social services, reducing time away from work, maintaining productivity and lessening the caregiving burden on families. Participation in group life and health insurance schemes can increase household financial resilience by increasing households’ ability to manage the impact of illness, injury, disability, death and income loss. Increasing employees’ access to these schemes is also a way for the private sector to take on a greater share of social service and health funding.

Fringe benefit tax (FBT) on group insurance schemes is a disincentive for employers to provide these schemes. The Financial Services Council NZ (FSC) asked NZIER to estimate the impact of removing Fringe Benefit Tax (FBT) on group life and health insurance products. We find that removing FBT could deliver up to $198 million in net economic benefits. The reduction in tax revenue will be offset by wider economic benefits for workers and employers in New Zealand. This includes the benefits of timely access to treatment and rehabilitation, which results in reduced absenteeism, presenteeism and staff turnover.