How to cut the cost of the commute with tax-free public transport and bike benefits

Quick answer: In New Zealand, employers can offer public transport and bikes as tax-free benefits through salary sacrifice. Employees pay from their pre-tax income, so a typical $80,000 earner spending $50 a week on public transport saves over $900 a year. With Workride Plus, employees save an average of 30 to 35% on a bike or e-bike.

In our latest webinar, Extraordinary and Workride were joined by Greater Wellington and ACC. They shared how public sector organisations are bringing these benefits to their people, what the rollout involves and what they learned along the way.

Speakers:

• Steve Zinsli, CEO, Extraordinary
• Aidan Smith, Co-founder, Workride
• Grant Fletcher, Head of Regional Transport, Greater Wellington
• Erin, Lead Advisor Sustainability and Climate Change, ACC
• Shiz, Remuneration Lead, ACC

Watch the recording here

What is tax-free public transport in New Zealand?

Tax-free public transport lets employees pay for their commute with pre-tax income. A law change a few years ago made public transport exempt from fringe benefit tax (FBT). Extraordinary holds New Zealand's only Inland Revenue binding ruling for pre-tax public transport, so employers can offer this benefit with confidence.

How does the Extraordinary public transport benefit work?

Employees reduce their gross salary by their weekly transport spend. That amount lands on their Extraordinary card each pay cycle, ready to tap on any bus, train or ferry in New Zealand, including AT, Snapper, Metlink and Bee Card networks.

The process for employers takes four steps:

1. Announce the benefit to your organisation.
2. Extraordinary handles sign-ups by emailing employees to ask how much they'd like to contribute each pay.
3. Payroll is set up, with contribution details sent to your team or straight into your payroll platform.
4. Funds flow automatically each pay run, and you get usage data to track uptake and savings.

How much can employees save on public transport?

An employee earning $80,000 a year who spends $50 a week on public transport saves around $18 a week by paying with pre-tax income. That's over $900 a year back in their pocket.

What does it cost employers?

Extraordinary costs $4.17 per user per month. Salary sacrifice also lowers employer on-costs such as KiwiSaver contributions and ACC levies. Once an employee contributes around $28 a week, those savings cover the cost, so the benefit is cost neutral for the employer.

More than 600 businesses use Extraordinary, including three of the Big Four accounting firms.

Why does public transport matter to Greater Wellington?

Grant Fletcher explained that the Wellington Regional Land Transport Plan aims for a 40% increase in mode share for public transport and active modes. Getting more people onto buses, trains and bikes helps cut transport emissions and reduce deaths and serious injuries on the road.

Key figures Grant shared:

• Public transport mode share in the region is now around 30%
• Bus patronage in the Wellington region is still growing
• Rail patronage is up across the country
• The AA estimates commuting by car costs $8,000 to $10,000 a year

Why tax-free public transport suits hybrid working

Monthly passes and 10-trip tickets were designed for a five-day office week. With hybrid working now the norm, those deals no longer suit most people. A pre-tax benefit lets employees plan around how often they actually come in and still get a discount.

How long did Greater Wellington take to roll it out?

Greater Wellington went from first conversations to launch in about 10 months. The team took a paper to its executive leadership team (ELT) in December, and the benefit went live the following June. Around 20% of staff already commuted by public transport, which made it a natural fit.

Key lesson: involve HR and payroll early. Once HR owned the project, the rollout ran smoothly. Staff can now enrol in the benefit and be up and running in under a week.

What is the Workride bike benefit?

Workride is a salary sacrifice programme for bikes and e-bikes. Employees swap part of their pre-tax salary for a bike, which cuts the real cost of the bike. Workride secured New Zealand's first Inland Revenue approval for a pre-tax salary sacrifice programme and now works with more than 2,000 companies.

Workride Plus is the fully financed option, and it's a strong fit for government organisations:

• Nothing up front for employees, with repayments spread across 12 months
• No financing exposure or cost for employers
• Flexible terms and a friendly cancellation policy
• Works at the vast majority of New Zealand bike shops
• A fully digital process with a simple employer dashboard

How much can employees save on a bike with Workride?

On average, Workride Plus employees save 30 to 35% on their bike or e-bike. For example, someone earning $85,000 who takes a $5,200 bike benefit sees their take-home pay drop by only about $3,200 over the year.

How did ACC launch a bike salary sacrifice scheme?

ACC used a staged approach to launch Workride Plus across roughly 4,500 staff at 24 sites.

Why ACC chose Workride Plus:

• Strong demand in ACC's annual staff commute survey
• Staff commuting is ACC's biggest emissions source and is included in its Carbon Neutral Government Programme (CNGP) targets
• Rising fuel costs put more pressure on staff

How ACC made it happen:

1. Built a detailed business case with uptake scenarios (2 to 10% in year one), payroll capacity testing, affordability safeguards and a legal check against the Public Finance Act.
2. Formed a cross-functional working group covering procurement, finance, information security, architecture, legal, people and culture, and payroll.
3. Ran a proof of concept with two kaimahi, then a pilot with 20.
4. Set clear business rules: permanent employees only, commuter bikes and e-bikes only, and no e-scooters.
5. Launched organisation-wide on 1 October.

How much admin does a bike benefit create for payroll?

Much less than ACC expected. ACC estimated 23 minutes of payroll effort per contract, but the pilot came in well under that, and no extra payroll staff were needed. In one case, approval took two minutes and payroll setup took five minutes. The employee was riding home in under two days.

Frequently asked questions

Is public transport tax-free in New Zealand?

Yes. Public transport is exempt from fringe benefit tax in New Zealand. With Extraordinary, employees can pay for public transport from their pre-tax salary under an Inland Revenue binding ruling.

Can I salary sacrifice a bike in New Zealand?

Yes. Bikes and e-bikes can be offered through salary sacrifice. Workride runs an Inland Revenue approved programme that saves employees an average of 30 to 35% with Workride Plus.

Can public sector organisations offer these benefits?

Yes. Greater Wellington offers tax-free public transport through Extraordinary, and ACC is launching Workride Plus. Workride Plus is designed to comply with public sector requirements, with no financing exposure for employers.

Can employees leave the public transport scheme?

Contributions are calculated over 12 months, but each employer sets its own policy on whether employees can leave the scheme and how often.

Can fixed-term or casual employees join?

It depends on your internal policy. Salary sacrifice works best for permanent employees with a steady salary. Many organisations limit bike benefits to employees on contracts of 12 months or more.

What happens when the binding ruling expires?

Both Extraordinary and Workride will renew their rulings. As long as the law stays the same, the outcome is expected to stay the same too. This isn't tax advice.

How do you increase uptake after launch?

Word of mouth plays a big role. 50% of Extraordinary's recent public transport growth came from existing customers as more employees heard about the benefit from colleagues. Clear FAQs, savings calculators and repeat internal campaigns all help.

Ready to help your team save on their commute?

Whether you want to offer tax-free public transport, a bike benefit or both, we can help you get set up. Book a demo with our team to find the right option for your organisation.

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