Do you understand FBT on motor vehicles?
Many companies offer work vehicles to staff as a means of work transportation. This means the company has to pay Fringe Benefit Tax (FBT) on this added benefit offered to employees and/or shareholder-employees over and above their salary or wages whether the vehicle is used or not. This means you are required to complete and file quarterly Fringe Benefit Tax returns with IRD.
If you are a sole trader or partner of a partnership then you do not have to pay FBT on your business vehicles as you will make income tax & GST adjustments for private use.
Employee travel to and from work is generally considered as private use of the company vehicle. If a work vehicle is made available for private use to an employee, associated persons or shareholder employees then you are required to keep records for that motor vehicle.
IRD requires that you keep records that:
- Identify the specific motor vehicle/s i.e. rego number
- Support the market value or cost price
- Show how the liable days are calculated for each quarter, with supporting documentation for any exempt days. If there are no exempt days in a quarter you don’t need to keep a record of days
- Outline any private use restriction (usually a letter or notice), and
- Include working papers showing how the total of any employee’s contributions for each quarter is calculated, with supporting documentation.
If you have outlined private use partially available for work related vehicles then you will need to keep written notice on file. This written notice must outline the actual days that the vehicle is available e.g. Saturday’s and Sunday’s or a statutory holiday. If you are not specific this would mean that the vehicle could be available on any day and full FBT would apply.
There are situations where motor vehicles are exempt from FBT, but do you know what these are?
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