Technical tax area: General articles

Statement on fringe benefit tax and motor vehicle multi-leases

Public Ruling BR Pub 04/03 applied for the period 29 March 2004 to 28 March 2009.

Since the ruling was issued, the Income Tax Act 1994 has been repealed and replaced with the Income Tax Act 2004, which has also been repealed and replaced with the Income Tax Act 2007. There has also been a legislative change for calculating fringe benefit tax (FBT) on leased motor vehicles.

Now expired BR Pub 04/03 ruled on an arrangement involving the leasing of a motor vehicle under a multi-lease product to a lessee, who in turn provided the motor vehicle to an employee of the lessee for the employee's private use or made the motor vehicle available for such private use or enjoyment.

FBT on leased vehicles used to be assessed on the vehicle's market value at the beginning of the lease, by virtue of section CI 1(a) or section CI 1(b) and Part A of Schedule 2 of the Income Tax 1994. Many leases were structured so that the lessee entered into a lease for a flexible or specified time (for example, 12 months), with the option or possibility of entering into further leases. This resulted in a new market value for each period and a commensurate reduction in FBT as the vehicle aged. The expired public ruling provided guidelines as to the characteristics such a multi-lease product needed to exhibit in order to be considered a new lease and how to calculate FBT in these circumstances.

The legislative change to the calculation of FBT on leased motor vehicles since the ruling was issued means the previous method is no longer available. Amendments to Schedule 2 of the Income Tax Act 2004 (now Schedule 5 of the Income Tax Act 2007) have aligned the treatment of leased vehicles with that of owned vehicles for the period beginning 1 April 2006. This means the fringe benefit in relation to a leased vehicle is now to be based on its cost price or tax value (that is, a motor vehicle's depreciated value) rather than its market value, as before.

As a result of the legislative changes, BR Pub 04/03 will not be reissued.

Other pages in: General articles

• Protocols between the Solicitor-General and Commissioner of Inland Revenue
• Panel statement RAP 002: Process for resolving potential unintended legislative changes in the Income Tax Act 2007
• Inland Revenue's Public Rulings Unit
• Secondhand goods input tax credits - marine farming licences and leases
• Subsidised transport provided by employers to employees - value for fringe benefit tax purposes
• New tax information exchange agreement with the Netherlands on behalf of the Netherlands Antilles
• The Commissioner's Table of Depreciation Rates
• Notice - Income Tax Act 2007
• The Adjudication Unit - its role in the dispute resolution process
• Removal of 5 cent coins from circulation - effect on GST tax invoices
• Summary of unintended legislative change submissions where Rewrite Advisory Panel considered there was no unintended legislative change

Date published: 28 May 2009

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