The Income Tax Act 2007 covers the application of fringe benefit tax (FBT) to the provision of motor vehicles by employers to employees. FBT arises when an employer makes a work motor vehicle available to an employee for private use, in connection with the employment relationship.


FBT arises when the vehicle is made available for use. It is irrelevant whether the employee actually uses the vehicle for private use.


Merely sign-writing a vehicle or satisfying the work-related vehicle exemption (for example because a vehicle is a double-cab ute) does not mean private use can be ignored.


Motor vehicle FBT does not arise on a particular day if the vehicle is:

·        a work-related vehicle at all times during the day;

·        used by an employee to make an emergency call; or

·        used by a qualifying employee for certain business travel exceeding 24 hours.

To be a work-related vehicle on any day, a vehicle must:

·        be a “motor vehicle” (i.e a four-wheel drive, some station wagons, or a double-cab ute).


·        not be a “car”. If a motor vehicle is designed exclusively or mainly to carry people, then it will not qualify as a work-related vehicle. This includes vehicles that have rear doors or collapsible rear seats. A station wagon will typically be regarded as a car designed exclusively or mainly to carry people unless there is specific evidence to show the station wagon has been designed equally to carry passengers and goods, or if the necessary alterations have been made to the vehicle to convert it into a work-related vehicle.


·        display, prominently and permanently, on its exterior, the form of identification the employer (or if the vehicle is hired, the owner of the vehicle) regularly uses in carrying out their undertaking or activity (i.e name, logo, acronym or other similar identification). Personalised number plates, or a business card affixed to the inside of the windscreen would not satisfy this requirement. Large magnetic door signs would also not satisfy the requirement for the form of identification to be “permanently” displayed.


·        not be available for the employee’s private use, except for private use that:

o   is travel to and from their home that is necessary in and a condition of their employment; or

o   other travel that arises incidentally to the business use, such as being on call.

An employee may use the vehicle to travel between work and home without generating FBT liability for the employer, if there was a condition of the employee’s employment contract that the work vehicle must be securely garaged at home, and not be used for private use at any other time. If the employer allows the employee private use of the vehicle on the weekends or after work hours, then the employer has liability to pay FBT on the vehicle for those days.

David Hoskin is a Barrister and Solicitor practising in civil and criminal litigation.