Question
Our Fleet Department purchase hatch style passenger vehicles from a dealership. The dealer converts these vehicles for us as follows:
- removal of the rear seats and fitment of a false floor and cargo barrier.
- folding rear seats and fitment of a false floor and cargo barrier.
The modified vehicle now has only seating capacity for 2 people. Based on the ATO’s guidelines per MT 2024 we are wanting to ascertain whether the car is now principally designed to carry a load (under one tonne) and not to carry passengers.
We ask the question to see whether modifications bring the cars within the sub-section 8(2) of FBT Act 1986 and possibly results in the car being exempt?
Answer
The answer to your question is, possibly.
It will come down to the exact nature of the modifications.
The best guidance we can provide is the ATO’s view with regard to the modification of vehicles is set out in MT 2033 as follows:
“7. … a vehicle’s design is generally established at the time of manufacture. In order to change that design it would be necessary that the modifications effect a permanent alteration to the vehicle.
8. A clear example of this would be the process involved in the production of hearses. Under this, a station wagon body is extended, the rear doors removed, flush panelling fitted and the compartment behind the driver’s seat suitably modified.
9. Whether or not modifications to a car satisfy the test detailed in paragraph 7 needs to be determined on the facts of the particular case. However, as a general rule, the requirement that modifications effect a permanent change to the car would be satisfied where they are not capable of being readily reversed such that the car could, if required, be used alternatively as a passenger or non-passenger car on a regular basis. The fact that re-conversion may be made difficult by the bulk of any equipment or goods regularly stored in the rear section is not relevant for this purpose; rather, satisfaction of the requirement is to be found in the nature of the modifications themselves.
10. Simply removing the rear seat or bolting it down would not be sufficient for this purpose. However, if, as has been put to this Office, that were to be done in conjunction with the fixing of a rigid floor panel, the reinforcement of internal panels, the fixing of a protective screen behind the driver’s seat and the fixing of shelving, etc., to a service vehicle, it would be accepted that the modifications were such as to bring the vehicle within the ambit of sub-section 8(2). Of course, the modifications would need to extend throughout the entire rear area, including that previously devoted to the rear seat. Simply fixing shelving etc., to the area behind the rear seat location would not bring the vehicle within the ambit of sub-section 8(2).”
You could consider applying for an ATO private binding ruling having regard to the extent to which the vehicle has been modified. There is certainly a case that the modifications appear to be of a ‘permanent’ type the ATO would accept as bringing the vehicle within sub-section 8(2).
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