Removing FBT on insurance would cut premiums, FSC says
The FSC is calling for changes to Fringe Benefit Tax rules, arguing the current settings discourage businesses from offering health and life insurance to employees.
Monday, December 15th 2025, 4:03PM 
9 Comments
The Financial Services Council (FSC) is continuing to call for changes to Fringe Benefit Tax (FBT) rules to make health and life insurance more accessible to New Zealand workers.
It wants the government to exempt employer-provided health and life insurance from FBT, arguing the current tax setting discourages businesses from offering cover as part of employee benefits packages.
FSC chief executive Kirk Hope says removing the tax would be a win-win.
"Our argument is - remove fringe benefit tax for employer group schemes, because what we know is that more employers would offer them. That would actually reduce the price of premiums, because you're expanding the market. That would make health insurance more affordable and more accessible," Hope told RNZ's The Panel.
"What that would also do is alleviate some of the pressure in the public system, because you're taking people out of that system that might be on wait lists, for example."
The push comes as research shows New Zealanders are twice as likely to insure their cars than themselves. The FSC's June 2025 report found 78% of people with life insurance and 56% with health insurance pay for it out of their own pockets rather than receiving it through work.
Hope says FBT particularly discourages small and medium-sized businesses from including insurance in remuneration packages.
"For families, you get people back into work more quickly because they can get their issue fixed without sitting on a wait list for two years. It's a little more nuanced than just giving a tax break," he says.
The FSC research also found cost of living pressures are the main reason people cancel or avoid insurance, though life and health policies are less likely to be dropped than other types of cover.
The council is engaging with ministers and policymakers to advocate for the tax change.
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Comments from our readers
Asking for tax relief is classic lobbyist behaviour which ignores the budget deficit and the fact any tax subsidies would be better spent elsewhere.
As mentioned above the life insurers already have favourable tax treatment not paying GST on life insurance.
Yes medical insurance is good but so are many things like gyms, education etc. picking out one sector for special treatment does not seem good policy.
Does anyone know why there is no GST on life insurance but other insurances and other goods and services have it? Presumably it is a legacy of the past.
Assuming these comments are indeed in good faith, and not sockpuppet 'lobbyist behavior' comments, GST is indeed payable on the vast majority of 'Life Insurance' products.
Specifically, Life Assurance - payment on death, is given dispensation under the same exemptions as core banking charges and interest.
To understand why this is, you need to understand that the 'Life Insurance' issued in New Zealand is overwhelmingly NOT 'Life Insurance', but instead 'Life Assurance' - there are generally no maximum 'cover terms' or upper age limits. If you take out a policy, as long as you continue paying the premiums - a payout is effectively guaranteed on death.
With regards to making a comparison with gym memberships - this displays a fundamental misunderstanding of the argument at hand as to why FBT on group insurance is seen by some as an own goal for the government.
Widespread adoption of Health Insurance significantly lessens the strain for non-acute treatments on the public health system. In Australia, for example, there is a tax rebate available for holders of private health insurance to account for the lower expected cost to the publicly funded healthcare system.
Nobody is asking for a rebate on personal income tax for holding Health Insurance, even though there is a strong argument that this could well be justified. All that is being explored here is the 'double dipping' with both GST (which again, the vast majority of insurance products DO incur) and FBT for group-style insurance.
1. "That would actually reduce the price of premiums, because you're expanding the market." Unclear exactly what is being said here. Which market is being expanded? Why would the price of health insurance reduce as a result?
2. Removing tax component feels like a temporary relief when the cost of health insurance continues to rise each year. Pretty sure most employers will soon question the cost of the health insurance again.
3. This seems to benefit only those insurers who provide group cover. Several (life) insurers are not in this market. Also those group products are the products that seem to get a lot of negative feedback (no non-pharmac or guaranteed wordings).
However, what would make a bigger difference though would be stronger regulation of, and caps on health providers pricing, along with mandatory disclosure of how it is set.
Group scheme consessions for employer provided schemes start at 15 employees.
Here in NZ 92% of businesses have 10 employees or less and employ about 2/3 of the working population.
So the reality here is we’re calling on a tax break for the top 8% of companies who can most afford both employer group schemes and pay FBT while the vast majority are left at a disadvantage.
The net impact is either they become more competitive or they take the profits.
Like most good ideas the law of unintended consequences applies, and what would be achieved here is to make it harder for the 92% of businesses to compete, both in the market in the unlikely case of the corporate passing it back to pricing or with their wage bill as they try and retain good talent.
If we’re to fix this; both for premiums and the economy, we need to apply this support and help to small businesses trying to grow.
If you want to genuinely make an impact to those insured, apply the concession to all medical insurance then everyone can benefit and not just a small sector.
The govt could at least look to bring the FBT rate in line with personal income tax rates. Most I see have an FBT rate over 60%. And the government collects GST on the premium as well.
Agree all medical insurance premiums should be tax deductible.
The difference being that voluntary is operated through salary sacrifice and not subject to FBT, or in the case of many, the policy is in the group and the individual pays the premium to the insurer directly.
For it to be employer and subject to FBT, the employer needs to be paying for it in addition to salary and not subject to salary sacrifice or PAYE tax paid incomes. Which is typically groups with concessions above 15 people where the employee doesn't have the choice of opting out.
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Similar for gyms and following this logic employers should be able to offer gym memberships to staff so it encourages healthy behaviour and reduces the government health spend.
The FSC is an industry lobby group so it is of course entitled to push for subsidies/ favourable treatment.
The life and health sector already has tax advantages with no GST on life insurance - so why not ask for more.