Inland Revenue is pushing back against public confusion around proposed changes to fringe benefit tax (FBT), clarifying that double cab utes have never been automatically exempt from the tax.
The warning comes a week a string of new ute launches at the National Fieldays event, where leading brands showcased their latest vehicles and farm equipment to thousands of prospective buyers.
Inland Revenue deputy commissioner of policy, David Carrigan, says misunderstandings have emerged during consultation on the Government’s potential overhaul of FBT rules.
It’s a “myth” that utes have always been FBT free, he says.
“When it comes to double cab utes, these are treated no differently to any other vehicle.
“Unless the use of the vehicle meets all the requirements for an exemption from FBT, then a double cab ute is, and always has been, subject to FBT. That is the current law.”
Carrigan says vehicles are only exempt from FBT when used strictly for work-related purposes — and that includes double cab utes.
A vehicle, including a ute, is exempt from FBT only on days it is used for essential work purposes, as outlined on Inland Revenue’s website.
Carrigan says “vehicles that are used partly for business and partly privately are subject to FBT now on the days the vehicles are used for private use”.
“The proposals do not change that treatment but remove the necessity to count days where a vehicle is or is not available for private use.
“The idea is to simplify FBT, not create additional obligations. If a business – including a farm – is not currently liable for FBT on a vehicle then it’s unlikely they would become liable for FBT under any proposals taken forward.”
The department recently held a round of public consultation on possible reforms to the FBT system, including the way motor vehicle use is measured.
“Inland Revenue has undertaken public consultation on FBT proposals, including for motor vehicles, after a lot of work with the tax community to understand businesses’ frustration with the current FBT rules,” Carrigan says.
“The aim of the proposals is not to increase revenue but rather focus on reducing the compliance costs of FBT by moving to a close enough is good enough approach rather than strict day counts of when a vehicle is and is not used for private use, ignoring any incidental use, such as stopping to pick up groceries on returning from business trip.”
While the consultation has closed, no decisions have yet been made.
“The government has not made any final decisions in relation to potential changes to the FBT regime and ministers are currently considering the feedback received from submitters on the Inland Revenue issues paper with a view to refining those proposals,” Carrigan says.
“The Government is considering feedback from consultation and any changes would progress through the normal legislative process, giving people another opportunity to make submissions.”
