If you operate your business as a company, and you make a vehicle available to an employee to use privately, you’ll be liable to pay fringe benefit tax (FBT). This applies on vehicles made available to:

• employees (and their associated persons), and
• shareholder-employees (business owners)

This applies whether the vehicle is actually used for private purposes or not.

FBT does not apply:

• to vehicles that come within the definition of being ‘work related vehicles’ that are not available for private use
• for certain emergency calls and some out of town travel
• for working owners in Look Through Companies (LTCs). Instead, such benefits are treated as a distribution of profit to the working owner to the extent of the private use
• for sole traders and partners in a partnership. Instead, they make income tax and GST adjustments for private use.

Not all ‘business’ vehicles are ‘work-related vehicles’ for FBT purposes. And some companies have other options instead of paying FBT. In some cases, exemptions apply.

When is FBT payable?

FBT is normally payable quarterly but can be filed quarterly, annually or by income year. Filing frequency depends on the type of company you manage, the benefits you provide and how much tax you pay.

It’s important for clients to get this right because the use of, and deductions claimed for, vehicles is a common feature of any Inland Revenue review of a company’s tax affairs.

You need to understand how the rules apply to your specific business. If you’re unsure and need advice, we’re here to help.