We are often asked if there is any way of not paying FBT on company cars. The simple answer has always been no. But with the changes to the FBT tax rules, shareholder-employees of close companies will be able to elect an alternative option to paying FBT on motor vehicles that are used for private purposes.
The amendment provides close companies the ability to elect to apportion expenditure on motor vehicles that are provided to shareholder-employees between business use and private use instead of paying FBT on the motor vehicle. This option is only available for newly purchased vehicles after 1 April 2017 or those that were first used for the business in an income year beginning after 1 April 2017 and the election must be made in this first income year. Therefore, close companies that already pay FBT on vehicles provided to shareholder employees must continue to do so until the current vehicle is replaced.
It is important to note that this election is only available for motor vehicles provided to shareholder-employees. FBT will continue to apply if a close company provides a motor vehicle to an employee who is not a shareholder.