David Parker looks to close ute tax exemption, as Jacinda Ardern defends legitimate ute comment

Revenue Minister David Parker is thinking about beefing up enforcement tax paid by ute drivers. Photo / Mark Mitch

Double-cab ute owners might be getting an unexpected call from Inland Revenue to see if they are paying the right amount of tax, after Revenue Minister David Parker said he was considering a clampdown on the fringe benefit tax rules relating to utes.

Owners of double-cab utes famously pay very little fringe benefit tax (FBT), which is designed to make sure that employees pay tax on their work perks such as using a work car for personal use.

Documents released under the Official Information Act show Parker has received advice on how double-cab utes were taxed and Parker confirmed he was considering acting on it.

Parker said the advice from IRD was that double-cab ute owners weren't exempt from paying FBT, despite a popular belief that there was an exemption in place. Instead, IRD thinks the existing rules aren't being properly enforced.

"The advice I have is there isn't actually an exemption for double-cab utes, the question is whether the existing rules are being properly enforced," Parker said.

Parker said IRD was not keen on chasing down the double-cab ute owners' taxes because it would not bring in much money.

However, he pointed to the Government's climate-change policies and the "proliferation" of the utes as a reason for a clampdown.

"Inland Revenue advised me that it's not quite as big an issue relative to other enforcement priorities but we are having a look at the issue because they are proliferating," Parker said.

Double-cab utes have long been considered to be covered by what amounts to an effective exemption for vehicles which are not primarily passenger vehicles, designed primarily for single-cab utes and vans to ensure tradies were not pinged by the tax.

That has acted as an incentive for others to buy them instead of ordinary cars to avoid the tax, regardless of whether utes were needed for the job.

The purchase and use of utes have come under scrutiny since the Government announced its feebates scheme – charging fees on high-emissions vehicles to pay for discounts on low-emissions vehicles.

In the wake of that, Prime Minister Jacinda Ardern came under fire from Opposition parties for saying many ute buyers were not using them for the "legitimate use" that farmers or tradies had.

Ardern later walked the comments back slightly, saying she "could have been clearer".

The Green Party and other environmental groups have put pressure on the Government to close the exemption because it is seen to encourage the uptake of high-polluting utes.

Green Party transport spokeswoman Julie Anne Genter said that she "absolutely" agreed the rules should be enforced.

"Anecdotally, the FBT advantage is a major driver of double-cab utes being provided as company cars," Genter said.

Genter has a member's bill in the ballot to change the FBT rules in favour of cleaner transport, including removing it from e-bikes, reducing it for electric vehicles (EVs) and specifying double-cab utes were treated the same as other passenger cars.

The Government also announced on Tuesday that it would extend an exemption for EVs from paying road user charges (RUC), saving EV drivers $800 a year.

The exemption was first introduced by Simon Bridges as transport minister and has been extended by subsequent governments.

The exemption will now apply until March 31, 2024.