Article

FBT Q&A ‘ Purchase of exempt vehicle v ordinary sedan

If an employee intends using their employer provided vehicle only for home to work travel with minimal other private travel is it worthwhile for FBT purposes providing them with an exempt vehicle?

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Question

We are considering the purchase of a new vehicle, where it is intended that the driver of the vehicle will have access for full business use, and will also have private use, allowing them to drive the vehicle strictly to and from their home to work.

Assuming similar purchasing and operating costs, would it be an effective tax strategy to purchase a ute or dual cab vehicle with a carrying capacity of over 1 tonne for this person as opposed to a standard 4 door sedan car.

Does this benefit still apply even if the non-car vehicle is not being used by a person performing trades, or other activities that would fully utilise the vehicle’s carrying capacity?

Answer

If a 1 tonne load or over carrying capacity vehicle is acquired then it will not be a car and the benefit of the s. 47(6) exemption will be available provided the only private use is home to work travel and other private travel that is minor, infrequent and irregular.

If the vehicle was designed to carry a load of less than 1 tonne then it is a car but if it is a:

(i)     a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne; or

(ii)    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)

then it will also be an exempt benefit under s. 8(2) to the extent the private travel is so limited as above.

Although the exemptions suggest the vehicles are designed for ‘workhorse’ purposes, the FBT exemption provisions noted above do not distinguish the vehicles based on the employees occupation or trade so a white collar worker is equally entitled to the exemption as a blue collar worker.

If the employee is happy to drive such a vehicle then for FBT purposes it would make sense going down the ‘workhorse’ path.

Disclaimer: This article is based upon information available as at the time of publishing and may be subject to change.