You may not need to pay fringe benefit tax (FBT) in certain situations, like if a vehicle is work-related, is used for emergency call-outs or business travel, or if the employee cannot use it.
Work-related vehicle exemption
FBT does not apply to any day a vehicle provided to an employee is classified as a work-related vehicle.
Not all business vehicles are classified as work-related. You must meet all of the following requirements and keep records for the work-related vehicle exemption to apply.
Requirements
- The motor vehicle must be drawn or propelled by mechanical power (including a trailer).
- Its gross laden weight must be 3,500 kg or less. Vehicles above 3,500 kg are treated as unclassified benefits.
- It must have permanent and prominently displayed business identification regularly used by the employer (or owner, if the vehicle is rented) on the exterior. This includes logos, acronyms and other business identification, but not magnetic or removeable signs.
- You must have written to employees notifying them the vehicle is not available for private use, except when travel between home and work is necessary in (and a condition of) their employment, or is incidental to business travel, for example, passing by the pharmacy on the way home.
- It must be mainly designed to carry goods, or goods and passengers equally. A vehicle designed mainly to carry passengers does not meet this requirement.
Vehicles mainly designed to carry goods, or goods and passengers equally, may include:
- utes, including extra cabs and double cabs – these are dual purpose vehicles and may be considered work-related, but they must meet all the requirements to qualify for the exemption
- light pick-up trucks
- vehicles with rear doors, permanently without rear seats - for example, vans, station wagons, hatchbacks, panel vans and 4-wheel drives. This applies if the rear seats have been welded down or made unusable because of permanent fixtures such as shelving, covering the entire rear seat area
- taxis, including sedans and station-wagons (the rear seat requirement does not apply to taxis).
All vehicles must still meet all the conditions to qualify for the work-related vehicle exemption.
No work-related vehicle exemption for private use days
FBT applies if you allow employees to use the vehicle for private use on certain days, such as weekends and statutory holidays. The exemption does not apply to any day the work-related vehicle is available for private use, even if the employee does not use it.
Emergency call-out exemption
FBT does not apply for the whole day when the employee travels from their home to attend emergency services for the health or safety of any person, or essential service call outs. These include:
- the operation of your plant or machinery, or the plant or machinery of your client or customer
- the maintenance of services provided by a local authority or a public authority
- the carrying on of a business for the supply of energy or fuel to the public.
The services must be requested by a member of the public, you, a client or a customer.
The call-out must take place between 6pm and 6am during the work week, or at any time on a Saturday, Sunday or statutory public holiday. There are no time restrictions in the case of emergency services for the health or safety of a person.
An employee on stand-by for an emergency call-out does not qualify for this exemption. They must actually attend a call-out.
Business travel exemption
An exemption from FBT may apply if an employee is required to travel on a regular basis in a business vehicle and if both of the following apply.
- The length of the trip is a continuous period of at least 24 hours.
- The use of the vehicle is required for the employee to do their duties.
The employee must be away from home with the vehicle for the exemption to apply.
Vehicles parked at airport car parks
If an employee parks a vehicle at an airport while they fly to another destination for work reasons, the business travel exemption does not apply, as the employee is not with the vehicle. However, any days between the employee’s departure and return are exempt from FBT, as the employee does not have access to the vehicle.
FBT may apply to the day of departure and the day of return if the employee has not been limited from using the vehicle for private use.
If an employee travels for private reasons and the vehicle is available for private use, FBT applies to all the days, including any days between the employee’s departure and return.
Unavailable vehicle
Sometimes vehicles may be unavailable for employee use, for example while being repaired. If the vehicle is not available, there is no fringe benefit. The vehicle must be unavailable for at least a 24-hour period. You must record a valid reason why the vehicle is not available.
More information
Go to Part 2 - Motor vehicles in the Fringe benefit tax guide – IR409.
Ways to value motor vehicles for FBT