Calculating the taxable value of motor vehicles (Motor vehicles)

If the vehicle was ...	and owned and leased for ...	then use ...
owned or leased before 1 April 2006	less than 5 years	the actual cost price.
owned or leased before 1 April 2006	5 years or more	either the actual cost price or tax book value.
bought or leased on or after 1 April 2006		either the actual cost price or tax book value.

Note
The same rules apply for leased and rented vehicles. Read "Leased or rented vehicles" below for more information.

How to calculate each option

Actual cost price

This is the actual GST-inclusive cost price including:

any initial costs of getting the vehicle on the road, and
costs of any fitted extras (eg, body kit, CD player, LPG conversion).

Don't:

subtract any trade-in value from the cost price, or
add expense items such as registration.

When calculating the taxable value the percentage is:

5% a quarter, or
20% if you file annual or income year FBT returns.

Tax book value

This is the GST-inclusive tax value, ie the value reflected in the financial accounts including any depreciation claimed.

This option acknowledges that motor vehicles predominantly devalue over time and where a vehicle is owned for more than five years, an employer's FBT liability will decrease.

When calculating the taxable value the percentage is:

9% a quarter, or
36% if you file annual or income year FBT returns.

A minimum value of $8,333 will apply to any owned or leased vehicle regardless of the value reflected in the financial accounts.

Leased or rented vehicles

If you rent or lease the vehicle you:

need to ask the lessor the cost price or book value depending on the method being used
must keep a copy of the lease agreement.

9 to 5 and "flip flop" leases

Several changes have been made to ensure these types of lease are subject to FBT.

The definition of private use of a motor vehicle has been extended. Private use now includes when 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 (see note below) with the employee or a person associated with the employee.

Note

When there is an agreement or an arrangement transferring a right to use a motor vehicle to the employer, the periods when:

the employee uses the vehicle privately, or
the vehicle is available for the employee's private use

are treated as being used by the employer.

This rule also extends to associated parties.

Releasing a motor vehicle

When you lease a vehicle which was leased previously to another person, the cost price is the market value (see "Definition" below) if:

the vehicle was not previously leased by an associated person, and
the lessor or owner is not associated to you or your employee, and
the lessor or owner is not your employee.

Vehicle acquired at no cost

If you acquired a vehicle at no cost, for less than its market value or at a cost that can't be determined from an associated person, then the taxable value of the vehicle is the higher of:

the original purchase price the associated person paid, or
the current market value.

Definition

Market value is the retail price you could have bought the vehicle for, from a licensed motor vehicle dealer.

You must have records to support the market value you use in your FBT returns.

Determining the value of pooled motor vehicles

If your business has a pool of vehicles for employees to use, work out the value of each vehicle from the table below.

If your ...	then use the ...
employee uses mainly one particular vehicle	value of that vehicle.
employee does not use one particular vehicle	highest value of all vehicles in the pool.
business is selling cars and the vehicles in the pool are trading stock	average value of all vehicles in the pool.

Example
Anglesey Wools Ltd has a pool of four vehicles, valued at $17,800, $18,900, $25,600, and $32,500.
All the vehicles are available for use by all the employees. No employee uses any particular vehicle, so the value for all vehicles is the highest value, ie $32,500. The company calculates their quarterly FBT return based on cost price:
Number of vehicles	4
multiplied by cost price of	$32,000
multiplied by (A divided by B)	90/90
multiplied by	5%
equals	$6,500
A = number of days available B = number of days in the quarter.

Calculating FBT when a motor vehicle is used privately

Quarterly FBT return filers

Fringe benefit value is ...	where Y is the lesser of ...	and Z is either ...
(Y x Z) divided by 90	the number of days during the quarter when the benefit occurred, reduced by the number of days during the quarter when the motor vehicle is a work-related vehicle, or 90	5% of the GST-inclusive cost price of a motor vehicle owned or leased by the employer, or 9% of the GST-inclusive tax value of a motor vehicle owned or leased for a quarter.

Annual and income year FBT return filers

Fringe benefit value is ...	where Y is the lesser of ...	and Z is either ...
(Y x Z) divided by 365	the number of days in the year (365) when the benefit occurred, reduced by the number of days during the year when the motor vehicle is a work-related vehicle, or 365	20% of the GST-inclusive cost price of a motor vehicle owned or leased by the employer, or 36% of the GST-inclusive tax value of a motor vehicle owned or leased for a year.

Start time for the 24-hour period when calculating private use

Employers can choose the start time of the 24-hour period which will apply to all vehicles they own or lease. Let us know your choice of start time on your next return.

The start time of the 24-hour period must be a number of whole hours after midnight. Your choice applies from the start of the quarter, income or tax year for the return and applies to all vehicles. You have to stay with this start time for a minimum period of two income years.

You can ask to have the start time amended or no longer applied if your circumstances have changed significantly and the starting time is no longer relevant.

This provision is good for employers who occasionally let employees take vehicles home overnight.

Example
An employee finished work at 6pm and travelled home, returning the vehicle at 8am the next day. Previously, as a "day" was based on a calendar day, two days FBT would have been incurred. If the employer chose a 6pm start time for the 24-hour period only one day's FBT would be incurred on this vehicle.

Employee contributions

If the employee pays any amount in return for having a fringe benefit, the payment is deducted when working out the benefit's taxable value.

The following examples show the difference in the taxable values using the cost price or tax book value options.

Example 1
Motor vehicle bought for $80,000.

Example 2
Motor vehicle bought for $20,000.

Example 3
Fleet of motor vehicles bought and employees make contributions.

Example 4
Motor vehicle leased for three years and then leased again.

Date published: 09 Dec 2008

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Fringe benefit tax (FBT)

Fringe benefit tax overview

Returning fringe benefit tax

Fringe benefit tax on specific categories of benefits

Calculating fringe benefit tax

Fringe benefit tax in relation to GST and income tax

Motor vehicles: Calculating the taxable value of motor vehicles