Can a double cab ute qualify for the work related vehicle exemption from FBT. We were asked this question recently at a TaxLab FBT training course.
The answer is yes, it can qualify. However, just because the vehicle is a double cab ute doesn’t mean you automatically get the exemption.
Work related vehicle FBT exemption
A work related vehicle creates a fringe benefit on any day that it is available for private use (the same as when other vehicles are available for private use). However, travel between home and a business premises (and incidental use) is legislatively excluded from being private use, provided that
- the travel is in a work related vehicle; and
- the travel is necessary and is a condition of their employment.
What’s a work related vehicle
Four tests must all be met for a vehicle to be a work related vehicle
- The vehicle must not be a car (Inland Revenue’s view is that to meet this test “the principal design of the vehicle cannot be for carrying passengers”); and
- The exterior of the vehicle must permanently and prominently display the name of the employer, or the business logo, acronym or other identification; and
- The employer, must have notified the employee in writing that the vehicle is available only for travel between home and work (or travel incidental to business travel); and
- The employer conducts and records checks to ensure that employees are actually following this restriction in real life.
Common errors
The exemption is very narrow. Most overlooked is that the exemption only covers exclusive driving between home and a business premises. If the employee uses a work related vehicle even once for private use (e.g. driving from home to the supermarket and back again) then the Inland Revenue will consider that the vehicle is always available for private use.
Also commonly overlooked is that the travel must be necessary and a condition of employment (a written condition in the opinion of Inland Revenue).
Partial exemption for weekend use
Inland Revenue does allow a partial exemption, essentially allowing employees to use a work related vehicle on weekends and public holidays only. The work related vehicle
- must not be available for private use for most of the week; and
- can only be available for private use on certain days (for example, weekends and statutory holidays). These days would attract FBT.