Changes to FBT rules on motor vehicles mean potential new savings. Let RightWay find the best FBT option that saves you the most.
For small companies with motor vehicles being used both for business and privately by shareholder-employees, the tax rules are often a compliance nightmare.
New rules in relation FBT coming into play on 1 April 2017 means things are about to change.
FBT rules up to 31 March 2017 (“The Old Rules”)
Under the Old Rules, companies can claim a tax deduction for all the costs of owning and running company motor vehicles. But they must also pay fringe benefit tax if the vehicles are available for private use by shareholders who are also employees of the company.
It doesn’t matter if most of the time you’re using the company vehicle for business use, if it is available to be used privately after business hours, or you drive it to and from the office each day, then you are caught in the FBT tax net.
FBT rules post 1 April 2017 (“The New Rules”)
Under the New Rules, some companies will be able to opt out of paying FBT on vehicles used by shareholders. Instead, they will claim motor vehicle costs based on the amount of actual business use, using a log book to establish the split between business and personal use.
For many companies, this will mean a cash or a tax saving, especially if the vehicle is mostly used for business.
Do the New Rules apply to me?
The changes come into effect for the 2017/18 financial year and apply to companies where:
• There are five or fewer shareholders
• The vehicle is acquired after the start of the 2017/18 financial year
• The vehicle is primarily used by one of the shareholders
So if you’re thinking about a new vehicle it might just pay to hold off until the new financial year! Or when you do acquire that new motor vehicle in the new financial year, we'd be happy to find the best FBT option that saves you the most.
Contact us today to find out more.