Company car tax perk to return: expert

A law change due on April 1 will offer some tax perks for company vehicles.

Small business owners are set to benefit from the expected return of some tax perks for company cars.

Under existing rules, if a company car is also available for personal use, it is subject to the fringe benefits tax.

The regulations assume that all use of these vehicles is personal and therefore even company use of them could be taxed.

But Mike Shaw, director at tax advisory firm OliverShaw, said planned changes would significantly benefit small and medium-sized businesses where the owner's car is used both at work and privately.

"While the halcyon days of tax-free company cars is not returning, [the] law change to take effect from April 1, 2017 will reintroduce some tax perks for company cars," Shaw said.

"This will remove the current tax costs where motor vehicles ... are used for non-business purposes by small and medium size enterprises (SMEs)," he said.

"This affects most SMEs operated by one or two shareholders (including mum and dad shareholders) and includes builders, electricians [and] accountants," he said.
Shaw said the change would mostly benefit company owners who worked at their business rather than the average employee.

The law change was going through Parliament, Shaw said.

He expected it would to be enacted shortly after politicians begin sitting for the year.

The shift would provide a system similar to that for non-corporate taxpayers that had vehicles for a mixture of business and private use.

"Basically the application of a log book will determine the deductible portion of the expenditure and no fringe benefits tax will be payable by these ... companies."

According to Shaw, even when the vehicles were not used for business purposes there were other benefits of it being company-owned.

The rule change would only apply to new motor vehicles purchased after the start of the 2017-18 financial year or when the vehicle was first-used for business purposes.

Revenue Minister Judith Collins could not be reached for comment on the planned changes.