Tax treatment of eye care payments

Many employers in the public sector provide eye tests for office staff, and may also contribute towards the cost of prescription spectacles. Historically, these payments have generally been treated as non-taxable. However, over the last few years, many public sector entities have received amended PAYE and GST assessments in relation to eye care payments. Some entities have also received amended FBT assessments in relation to these payments.

The IRD considers that eye care payments made to office staff are generally taxable, as the costs are private in nature. PAYE should be deducted from reimbursements for spectacles or eye tests, and GST should not be claimed on these payments. Due to the FBT exemption for health and safety benefits, eye tests provided as a fringe benefit can be treated as exempt from FBT, but spectacle contributions provided as a fringe benefit would generally be regarded as 50% taxable.

It should be noted that the FBT regime only applies to non-cash benefits (i.e. where the employer is invoiced for the benefit). If the employee is invoiced, and the employer pays the invoice or reimburses the employee, the benefit is subject to PAYE. The FBT exemptions for minor benefits and health and safety benefits do not apply to reimbursements.

This document is intended only as a general guide, and should not be used or relied upon as a substitute for specific professional advice. No liability is accepted for loss or damage incurred by persons who rely on this document.

Page created: 23 June 2017