You have to pay fringe benefit tax (FBT) if your business makes a vehicle available for employees, their associated persons and shareholder employees to use privately – even if they do not actually use it.
The vehicle is exempt from FBT during any period when it is not available to be used for at least 24 hours, such as if it has broken down or is being repaired.
Sole traders and partners in a partnership do not pay FBT on business vehicles they use.
Instead they make income tax and GST adjustments for private use.
Exemptions from FBT on motor vehicles
Work-related vehicle exemption
FBT does not apply to a vehicle if it meets all of the following conditions:
- it is drawn or propelled by mechanical power (this includes trailers)
- it has a gross laden weight of 3,500 kg or less
- the vehicle is mainly designed to carry goods or goods and passengers equally
- it has prominent company branding that cannot easily be removed
- you tell your employees in writing that the vehicle is not available for private use except for travel between home and work, and for travel related to the business, such as stopping at the bank on the way home from work.
You must give employees a separate letter explaining this restriction rather than mentioning it in their employment contract.
If a vehicle above the gross laden weight is provided to an employee for private use this may need to be treated as an unclassified benefit. You should regularly check logbooks, petrol receipts etc to make sure employees are using the vehicle appropriately.
You should also keep a record of these checks.
If an employee uses a vehicle to attend an emergency call, FBT will not apply for that whole day when the employee travels from their home, and in the course of their employment provides:
- essential services relating to the operation of your plant or machinery, or the plant or machinery of your client or customer
- essential services relating to the maintenance of services provided by a local authority or a public authority
- essential services relating to the carrying on of a business for the supply of energy or fuel to the public
- emergency services relating to the health or safety of any person
- the services must be requested by a member of the public, the employer, their client or customer.
The visit 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 health or safety of a person.
If an employee regularly travels with a vehicle, FBT may not apply when:
- they stay away from home overnight with the vehicle
- they are away for more than 24 hours
- they need the vehicle to perform their work.