A fringe benefit tax (FBT) comes into play when an employer makes a motor vehicle available to an employee, associated persons or shareholder for their private use, even if they do not use the car.
However, there are exemptions to this fringe benefit tax which are important to know, according to New Zealand’s premier accounting professionals Tauranga-based Tutbury & Associates Limited.
“Sole traders and partners in a partnership do not pay FBT on business vehicles they use,” Kelly Tutbury, Accountant and Managing Director at Tutbury & Associates Limited states.
FBT does not apply to a vehicle if it meets all of the following conditions:
- It is drawn or propelled by mechanical power.
- 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 a prominent company branding that cannot easily be removed.
“You need to inform your employees in writing that the vehicle is not accessible for private use except for travel between home and work and it should only use for travel related to the business,” advises Kelly.
If an employee uses a vehicle to respond to an emergency call, FBT will not apply for that whole day when the employee travels from their home. If the purpose of the visit is to provide “essential services”, then these services have to be completed between 6pm and 6am on weekdays or on a Saturday, Sunday or public holiday.
The essential services need to be related to:
- 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 supply of energy or fuel to the public.
- Emergency services relating to the health or safety of any person.
If you have an employee that regularly travels for businesses, FBT may not apply when; they stay away from home overnight with the vehicle, they are away for more than 24 hours or if they need the vehicle to perform their work.
About Tutbury & Associates Limited:
Tauranga-based Tutbury & Associates Limited has worked hard to build their reputation of excellent customer service by working interactively with their clients and making sure that their clients get value for money. They are ideal for trades people, or anyone who wants to grow their business.
Contact Tutbury & Associates Limited:
Phone: 07 576 2194
Address: 23 Myres Street Tauranga