Things to watch out for with FBT on motor vehicles

Things to watch out for with FBT on motor vehicles

There appears to be increased activity by Inland Revenue around Fringe Benefit Tax (FBT) compliance. They have updated the information on their website and recently sent “are you filing your FBT correctly?” emails to entities registered for FBT. This could be a sign that the IRD are looking closely at FBT at the moment so it is important that you get it right to save yourself in the event of an IRD audit.

Quick summary of FBT on motor vehicles

If you provide a vehicle to an employee (or shareholder employee) that they can use privately – and normally travel between home and work is personal travel – then you are likely to be required to register for and pay FBT.

It does not matter if the employee does not use the vehicle privately it matters whether the vehicle is available for private use.

Ways you can shore up your position that a vehicle is not available for private use include:

  • Leaving the vehicle on business premises at night
  • Leaving the keys to the vehicle with someone else/at the business premises when not being used for business
  • Writing to the employee stating the vehicle is not to be used personally and cementing this each year with an email.

Curly questions about availability

  • If the vehicle has been involved in a crash and is at the panel beaters – not available for private use for those days.
  • If the employee has gone on a holiday and has left the vehicle at the airport car park – still available for private use. Whether the vehicle is available or not is determined by the actions of the employer, not those of the employee.
  • If the employee has gone to a work conference out of town – not available for private use as the employer has required the employee to be out of town and therefore taken access to the vehicle away.

Work related vehicle exemption

Some vehicles may be exempt from FBT on the basis that they are a “Work Related Vehicle” or WRV. For a vehicle to be exempt from FBT under the WRV exemption the vehicle must:

  • Have permanent and prominent sign-writing displaying the business’ name, logo or branding
  • Not be a car
  • Not be available for private use.

Permanent and prominent signwriting

There is no guidance on what constitutes “prominent” signwriting but it has been determined that a personalised number plate is not enough to meet the requirements. The signage must be outside of the vehicle and it cannot be temporary – i.e magnetised signs are easily removed and therefore also do not meet the requirements.

Not a car

To test whether the vehicle is a car or not, you should consider whether the primary purpose of the vehicle is to carry passengers. If yes, then it is a car and cannot be a WRV. If the vehicle’s original purpose was to carry passengers but you have since modified it to carry tools for example, then this may meet the definition of a WRV. Examples of modifications that can be made to vehicles in order to be a WRV include removing the backseats or building over the backseats with permanent shelving. Simply folding down the backseats is not enough.

As well as vehicles that have been modified so some seating is not available, the FBT guide published by the IRD states that utes (including double cab utes), light pick-up trucks and taxis may qualify for the WRV exemption.

Not available for private use

A work-related vehicle is not considered available for private use if the vehicle is used for home to work travel as necessary for the employee’s employment. Incidental travel is allowed, e.g. you can stop off on the way home at the supermarket or to pick the kids up from school.

If you allow your employee to use their WRV on the weekends for private use then you can return FBT on 2 out of 7 days per week.

Get advice

This is not a complete guide on FBT for motor vehicles but rather a summary of issues that are important for clients we work with. There are lots of rules and exemptions around FBT. It is best you seek help to ensure you are complying with the regulations.

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