FBTnews - 2006
Issue 16 September 2006
In this issue:
- Taxable value of motor vehicles
- "9-5" and "flip-flop" leases
- Fringe benefit tax guide (IR409)
- FBT prescribed interest rate
Welcome to FBTnews
In this issue we look at how to calculate the taxable value of motor vehicles and "9-5" and "flip-flop" leases. Also a new updated version of the Fringe benefit tax guide (IR409) is now available.
Taxable value of motor vehicles
When calculating the fringe benefit taxable value of a motor vehicle its important to remember that regardless of whether you are using the cost price option or the tax book value option, FBT should be calculated on the GST-inclusive value of the vehicle.
A motor vehicle fringe benefit is calculated by multiplying the GST-inclusive cost price or GST-inclusive tax book value of the vehicle by a set percentage, which reflects the costs of motoring for the number of days the vehicle is available for private use. For example, if you file quarterly fringe benefit returns and use the cost price option, the percentage you should use is 5%. Using the tax book value option the percentage is 9%.
If you record the value of your vehicles in your books exclusive of GST then you will need to use a proportionately increased percentage to ensure the same amount of FBT is paid. The FBT taxable value calculation sheet, that's included with your fringe benefit tax return, shows these values.
The table below shows the value of the benefit proportionately increased to include GST.
For example, quarterly value of 5% + (12.5% GST) = 5.625%.
| Taxable value calculation sheet | Type of return | Value of benefit if vehicle cost includes GST | Value of benefit if vehicle cost excludes GST | Value of benefit if tax book value vehicle includes GST | Value of benefit if tax book value vehicle excludes GST |
|---|---|---|---|---|---|
| IR427 |
IR420 quarterly |
5% |
5.625% |
9% |
10.125% |
| IR428 |
IR421 income year |
20% |
22.5% |
36% |
40.5% |
| IR429 |
IR422 annual |
20% |
22.5% |
36% |
40.5% |
If you are using the tax book value option the amount of depreciation you can claim will depend on the type of vehicle you have.
The depreciation rates for motor vehicles (designed exclusively or mainly to carry people; up to and including 12 seats) listed in the asset category "Transportation" have increased as follows:
|
|
DV |
DV+20% |
SL |
SL+20% |
| Motor vehicles designed exclusively or mainly to carry people, up to and including 12 seats, acquired before 1 April 2005. |
26% |
31.2% |
18% |
21.6% |
| Motor vehicles designed exclusively or mainly to carry people, up to and including 12 seats, acquired on or after 1 April 2005. |
30% |
36% |
21% |
25.2% |
Note
The 20% loading is only available for new vehicles and does not apply to imported used cars.
For most other vehicles in the transportation asset category the depreciation rates have remained the same. You can find the depreciation rate for any vehicle and calculate the amount of depreciation you can claim. See Work it out.
Note
The minimum value of $8,333 must be used to calculate the taxable value once the vehicle's tax book value has depreciated to less than this amount.
For vehicles owned or leased prior to 1 April 2006, FBT must be calculated on the cost price of the vehicle, unless you have owned or leased that vehicle for five years. If you have owned or leased the vehicle for five or more years you can choose to use either option.
"9-5" and "flip-flop" leases
From 1 April 2006, these types of vehicle leases are treated the same as any other vehicle lease for FBT purposes. So any private use of a leased vehicle regardless of the details of an agreement mean FBT is payable on that private use.
A "business-use" or "9-5" lease will be ignored for FBT purposes. These are leases which have been favoured as a means of allowing the individual to enjoy the use of the vehicle outside the business lease period, without the company being required to pay FBT for that private use.
This is because the definition of private use of a motor vehicle has been extended to include the person who makes the vehicle available to the employee:
- owns the vehicle
- leases or rents the vehicle
- has the right to use the vehicle under an agreement or arrangement with the employee or a person associated with the employee.
Example
Bob, as shareholder employee of a small cheese company leases his car to the company during business hours. Bob uses the vehicle during the day to make sales calls and deliveries.
Because the vehicle is available and used by Bob at all other times as his private motor vehicle, the company is liable for FBT on the private use of the vehicle.
Fringe benefit tax guide (IR409)
We've updated the Fringe benefit tax guide (IR409) and this is now available in Forms and guides. You can order copies of this from the end of September, by calling INFOexpress on 0800 257 773.
Future FBTnews
If you have a FBT topic you'd like to see in the newsletter you can email us at fbt.news@ird.govt.nz or write to the Editor, FBTnews, PO Box 2198, Wellington and we'll aim to cover the topic in a future edition.
FBT prescribed interest rate
There's no change to the prescribed rate of interest for calculating the fringe benefit value of low-interest employment-related loans for the quarter beginning 1 July 2006. The rate is 9.55%.
Due date reminder
Fringe benefit tax quarterly return (IR420) for the period 1 July to 30 September 2006 is due on 20 October 2006.
Kathleen Clement
Manager
Delivery, Planning and Initiation
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Date published: 13 Sep 2006
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