Motor vehicles left at the airport
Motor vehicles left at the airport has been regarded by many as an exempt day for Fringe Benefit Tax (FBT) purposes for many businesses.
The business travel exemption applies when:
- an employee is absent from home with the vehicle for at least 24 hours; and
- the employee is required to use a vehicle in the performance of their duties; and
- the employee is required to be regularly absent from home in the performance of their duties.
An employee might have left the car in an airport carpark to go on an overnight trip somewhere in the country, or overseas. When the FBT return is filled out, the days where the car was parked up are often claimed as exempt from FBT.
The IRD have recently clarified the rules around vehicles when the employee is out of town. In their recent interpretation statement, the IRD stated that “the business travel exemption will apply only where an employee is absent from home “with” the vehicle. If the vehicle is parked at an airport while the employee travels by plane to another destination, then the vehicle is not “with” the employee and the exemption will not apply”. Whether or not the employee left their vehicle at home and took a taxi to the airport, or drove and parked the vehicle at the airport, makes no difference.
So, if an employee drove from Auckland to the Taranaki on a three day sales trip, that would probably satisfy the requirements for the business travel exemption if the three rules above are met.
If the employee drove to the Airport and jumped on a plane, it wouldn’t. The car is available for the employee’s use on day one and day three of the trip. Only day two would be exempt from FBT as the vehicle is still made available to the employee for his or her private use on the day of departure and the day of return.
Don’t forget that regularity is important. One-off trips probably wouldn’t satisfy the rules. The IRD states that “regularly absent from home” should be interpreted as meaning travel that occurs with reasonable frequency or at short uniform intervals, such as monthly travel. Infrequent or occasional travel (for example, a yearly trip, even if the trip was for the same reasons, say attending an annual conference) would not satisfy this requirement.”
The department does allow an exception if the employer has specifically withdrawn the employee’s access to the motor vehicle while they are away. For instance, if the employee was sent overseas to attend a conference, the IRD would accept that the employee’s access to the vehicle has been withdrawn.
It’s important to note that a fringe benefit is a benefit provided to an employee in connection with their employment. The availability for private use is also important, whether or not the vehicle is actually used for that purpose.
The Inland Revenue’s full information statement on FBT and motor vehicles is available to download here.
Fringe Benefit Tax is a complex area, and the information provided above is general in its application. We strongly suggest you get a professional opinion tailored to your specific needs if you are providing motor vehicles for staff. Generate Accounting are experts in this area and would be very happy to help.