Early this year Inland Revenue released updated guidance to remind taxpayers how fringe benefit tax (FBT) rules apply to travel between home and work.
Employers should be checking to ensure FBT rules are being correctly applied to all motor vehicles.
Home-to-work travel remains inherently private in nature, so FBT applies to this travel unless a specific exemption exists.
Case law exceptions where home to work travel may not be subject to FBT:
- A vehicle is needed to transport equipment or instruments essential for work
- The employee’s work is itinerant (moves between multiple sites)
- The employee responds to emergency calls from home and responsibility begins before leaving home
- The employee’s home is a workplace or base of operations
The criteria are not easy to satisfy so the case law exemptions apply in limited circumstances.
Statutory exemptions also exist, perhaps the most often relied on is the work-related vehicle (WRV) exemption. There are also exemptions for emergency callouts and business travel exceeding 24 hours.
Here we focus on the WRV exemption. A motor vehicle fringe benefit arises when an employer makes a motor vehicle available to an employee for their private use.
The WRV definition has several layers to it and further, a vehicle is only exempt from FBT on days that it satisfies all the WRV criteria. A WRV is a motor vehicle that:
- Prominently and permanently displays on its exterior the employer’s identification; and
- Is not a car; and
- Is not available for the employee’s private use, except for private use that is:
- Travel to/from home required by the job
- Incidental travel in the course of work
Sign-written double-cab Utes are often assumed to be automatically exempt, but they are only exempt if all the above criteria are met and private use, beyond incidental purposes, is prohibited.
Employers should document private use restrictions, ideally in employment agreements or written notices, and monitor compliance regularly, with Inland Revenue recommending quarterly checks using logbooks or petrol records.
In summary if your employees have access to vehicles for their private use it might be a good time to check whether your FBT obligations are being met.
Please don’t hesitate to contact your client manager on 07 885 1022 if you have any questions.