FBT & motor vehicles – work related vehicles

FBT & motor vehicles – work related vehicles


In our video “FBT and motor vehicle exemptions”
Chris and Veri Cross discovered there are some exemptions that apply to FBT.
Now they are wondering about signwriting and if that affects FBT.
So if Chris or Veri’s cars had signwriting on them,
does that mean no FBT has to be paid?
What do you reckon Trevor?
Signwriting is relevant for a work related vehicle.
This is a vehicle you need to do your job,
but it doesn’t apply to cars,
other than taxis.
Is that why you see so many utes and vans with signwriting?
Maybe. To be a work related vehicle, it needs to be designed to carry goods
or, not mainly designed to carry people.
What about the signwriting you see on cars?
That could just be for ads
because they can’t escape FBT by having signwriting.
Well, how do work related vehicles work then?
Garry, our installation specialist, is frequently out at client sites and needs a vehicle to do most of his job.
We bought him a double cab ute to use for work.
Because Gary is sometimes on call,
and we don’t have enough secure parking at work,
he takes the ute home each night to store.
If Garry doesn’t have permission to use the ute privately there’s no FBT to pay right?
It’s not quite that easy.
If Garry takes the ute home at the end of each day,
that’s private use, and there’ll be FBT to pay.
But is it private use if Garry has to take the ute home because it can’t be stored at work?
This is a really common FBT misconception.
Requiring an employee to store a vehicle at home for security reasons
doesn’t make the journey from work to home “work-related”.
The employee is still getting a private benefit.
And this is where the work related vehicle comes in.
If you have a work related vehicle,
you can take it from home to work and back again without paying FBT.
Ok, so what is a work related vehicle?
Generally, a work related vehicle,
can’t be a car,
must have signwriting with the business name permanently and prominently displayed,
must be necessary for carrying out the employee’s role if it is stored at their home,
and this must be required in writing,
and can’t be used privately.
Ok, I get all that,
but is Garry’s double cab ute ok?
Yes. It’s not mainly designed to carry people, so it’s ok.
Do you have to get signwriting?
I’ve seen vehicles with personalised plates, is that good enough?
Probably not.
It needs to be prominent and it must be the logo or name that the business trades under.
It also has to be permanent.
So you can’t use magnetic signs either.
Do you put the restrictions on private use in a letter to employees?
You can, or you can put it into their employee’s employment agreement.
And then once Gary gets the car home, he’s not allowed to use it privately.
That’s correct.
It pays to keep checks to make sure Gary isn’t using the ute every now and again.
This way Crossed Wires can show everyone takes the arrangement seriously.
That can come in handy if Inland Revenue comes knocking.
I know you said you can’t use the vehicle privately,
but I see a lot vehicles with signwriting at the supermarket or towing boats in the weekends.
Is there a rule for that?
That’s a very good question.
For the work-related vehicle exemption you can’t use the vehicle privately.
You can however choose to pay FBT for some of the time and then you can use the vehicle privately.
With Gary, he asked if he could use the ute during the weekends for transporting his model boats.
Veri and Chris agreed to pay FBT for Saturdays and Sundays
so Garry is free to use the vehicle during weekends now.
That means we pay FBT for 2 days of each week.
What happens if Garry get called out in the weekend?
That’s another great question.
Crossed Wires can claim the emergency call exemption
so they don’t have to pay FBT on Garry’s ute for that day.
So remember,
a work-related vehicle must have signwriting and cannot be a car.
The employee must need the vehicle to do their job,
and they can take it home and no FBT applies.
However,
FBT will apply for any day they’re allowed to use it privately.
For more information about FBT, go to the IRD website.
You can check out the whole Crossed Wires in interpretation.
Look for the search keyword “interpretations”.

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