A Ferrari California – principally designed to carry passengers?

For attendees at our in-person or online FBT training events and readers of our monthly Tax Updates you will often come across us referring to the FBT exemption for cars that are “workhorse” type vehicles.

Specifically, subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986 (FBT Act) provides that taxis, panel vans and utility trucks designed to carry a load of less than 1 tonne; or any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers), are FBT exempt provided that there is no private use of the car other than:

• work-related travel of the employee — i.e. travel between home and work, or travel that is incidental to travel undertaken in the course of work; or

• minor, infrequent or irregular private use travel.

To assist identifying vehicles that aren’t designed to principally carry passengers, a formula in Miscellaneous Taxation Ruling MT 2024 may be applied. The formula compares seating capacity by passenger weight (68kgs) to total load carrying capacity to determine principal purpose, (i.e. load or passenger carrying).

This principal was put to the test recently in the case of MXSN and FCT (Taxation) [2026] ARTA 186, a taxation decision of the Administrative Review Tribunal ‘(ART’).

Facts

• The company (MXSN) provided a luxury sports car — a 2010 Ferrari California — to its sole director.
• The vehicle was acquired under a 100% financed hire-purchase agreement.
• The director had full private use of the vehicle and garaged the vehicle at home.
• Evidence was obtained from a highly regarded US-based expert that the vehicle was a “highly exclusive sports car that is born to race”.

Issue

• Whether the Ferrari could be treated as exempt from FBT on the basis that it was a “commercial vehicle” or a vehicle “not designed to carry passengers”.

Tribunal’s Decision

• The ART held that the company was liable for FBT on the provision of the Ferrari to the director.
• It found that on its proper construction, the exemption “only applies to commercial vehicles”, and the Ferrari was not a commercial vehicle.
• It stated that while the Ferrari may be considered a sports car, it was designed for the purpose of carrying passengers. 
• The ART found the director’s logbooks were “complete fabrications” and placed no weight on them.
• It was not satisfied that any private use (including trips by the director and his girlfriend to Margaret River) was “minor, infrequent and irregular”.

The decision is of no surprise.

The ART’s reasoning underscores that the ordinary design and use of a vehicle — and the statutory definitions in FBT Act — are decisive of whether a vehicle is exempt.

A key takeaway though is that even if a vehicle is of a design that qualifies for exemption, the “minor, infrequent and irregular” private use requirement must still be satisfied. Weekend getaways, in this case to Margaret River, prevented any chance of the “”minor, infrequent and irregular” requirement being satisfied.

Employees with private use of employer provided eligible dual cab style vehicles which are regularly used for weekend getaways and other leisure pursuits are reminded that subsection 8(2) exemption is determined by both the type of vehicle AND use there-of.

The ATO also identifies incorrect subsection 8(2) exemption claims as an area that “attracts our attention“.

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This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.