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New FBT Rules for Shareholder-Employees

FBTOne of the questions that we are frequently asked is “Is there anyway I can not pay FBT on my car?”.  To which our answer to date has always been “No”.  However, this is about to change for some taxpayers.  The Taxation (Business Tax, Exchange of Information and Remedial Matters) Act 2017  introduced proposed legislation that will allow shareholder-employees of close companies to elect an alternative option to paying FBT on motor vehicles that are used for private purposes.

The amendment will allow close companies to elect to apportion expenditure on motor vehicles that are provided to shareholder employees between business use and private use instead of paying FBT on the motor vehicle.  This option is only available for newly purchased vehicles after 1 April 2017 or those that were first used for the business in an income year beginning after 1 April 2017 and the election must be made in this first income year.  Therefore, close companies that already pay FBT on vehicles provided to shareholder employees must continue to do so until the current vehicle is replaced.

We note that this new apportionment rule only applies in respect of motor vehicles provided to shareholder-employees.  Therefore, FBT continues to apply to motor vehicles that are provided to employees who are not shareholders.  If you are considering purchasing a new vehicle for your business, or introducing a vehicle that was previously unused in the business to the business, this is an option worth considering.  There are potential benefits, such as if the only fringe benefits being provided are motor vehicles to shareholder-employees, this option would remove the need to be registered for FBT and file FBT returns.

If this is of interest to you, please contact us to talk through the considerations.