Meet Chris and Veri Cross. They are shareholder-employees of the IT company Cross Wires Limited. Trevor is the company accountant. He is an expert when it comes to tax. Chris and Veri travel frequently for work to meet with investors, clients and to attend conferences, so they buy two cars for their business. Chris thinks that if they sign-write their vehicles they won’t have to pay tax on the use of them. Veri usn’t sure that this is the case Trevor is here to help clear things up. What do you reckon Trevor? First it helps to understand a bit about Fringe Benefit tax or FBT. Salary or wages paid to employees are taxed as PAYE. Having the use of a car isn’t salary or wages so it isn’t taxed as PAYE. To make things fair, if you provide an employee with a non-cash benefit it is taxed as FBT. The general rule for FBT is if you provide an employee with a motor vehicle and it is also made available for private use, then FBT is payable. It doesn’t matter whether the vehicle is sign-written! But if the vehicle isn’t used, there’s no FBT to pay right? This is a really important point. FBT focuses on whether you make the vehicle available for private use. This means FBT can apply even when the vehicle isn’t actually used privately. A vehicles is “made available” when the employee has access to the vehicle and permission to use it for private purposes. Back to Chris and Veri’s situation. Chris and Veri agree that her car will only be available for business purposes. And Chris’ car for both business and private purposes. So while the cars are identical, the FBT treatment is very different. Let’s check if FBTapplies to Chris’ car. What do you reckon Trevor? Chris takes the car home each night, so he has access to the vehicle. Chris and Veri agreed Chris can use the vehicle for whatever he likes, so he has permission too. Since Chris has both access to the car, and permission to use it privately, it is made available to him and FBT applies. What about Veri’s car, does Crossed Wired have to pay FBT? What do you reckon Trevor? Veri leaves her car at work overnight, and only uses it for business travel. Veri has a letter from Crossed Wires to confirm she is not allowed to use it for personal travel. Because Veri doesn’t have both access to the car, and permission to use it for private purposes, it isn’t made available to her and there is no FBT to pay. It helps Veri has her own transport too – she doesn’t need to use the car privately. So remember, if an employee is given access to a work vehicle, and permission to use it privately, FBT applies. For more information about FBT go to the IRD website. You can check out the whole Crossed Wires stories in Interpretation. Look for the search keyword, interpretations.