Yes, it’s true. Sort of, kind of anyway! Some of you are now eligible to have a company car without the sting of paying Fringe benefit tax (FBT) on it. Nothing’s quite that simple though especially when it comes to the intricacies of tax legislation and there are, of course, a whole string of eligibility requirements. We’ll cover a few of them below but this type of thing is complex and riddled with fish hooks so it’s well worth having your Chartered Accountant review your situation properly before you do anything rash.
Generally, small close companies (with less than 25 shareholders) are eligible provided none of the following apply:
You can’t use this option …
- for existing vehicles acquired or used in the business before 31-Mar-2017.
- when vehicles are provided to employees who aren’t shareholders.
- if the shareholder-employees are provided with more than two vehicles.
- if you provide other fringe benefits (eg. health insurance, low-interest loans, free/discounted goods etc)
- if notice isn’t given to the IRD of the election before the tax return is due.
Now, instead of Fringe Benefit Tax, you’ll be able to claim your vehicle expenses in much the same way you might’ve done if you ever traded as a sole trader or partnership. For many, this will simply mean keeping a three-month logbook to work out the business percentage and claiming the business percentage only or claiming based on mileage rates (subpart DE of the Income Tax Act 2017).
From the start of the 2017/18 income year which for many will mean from 1-Apr-2017 onwards.
Seriously, sometimes just having a car in the company and paying FBT is the best option especially if you use it a lot personally and are allergic to record keeping!
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