Fringe benefit tax for close companies

Fringe benefit tax and income tax return filing

If you’re a close company (5 or less people hold more than 50% of the voting interests or market value interests of the company) you can file an income year fringe benefit tax (FBT) return and income tax return at the same time if:

• your gross PAYE and employer superannuation contribution tax (ESCT) for the previous year were $1,000,000 or less

• the only fringe benefit you provided was up to two motor vehicles for private use by shareholder-employees, or

• you were not an employer in the previous year.

Motor vehicles

Close companies can opt out of the FBT rules for motor vehicles if they:

• have only 1 or 2 motor vehicles available for private use by their shareholder-employees, and

• do not provide any other fringe benefits.

If you choose not to use the FBT rules you'll have to:

• elect to opt out of the FBT rules

• apply the rules for vehicle expenditure in your income tax return, and

• use the rules for determining motor vehicle expenditure to make an adjustment for private use.

You can make an election by writing a note that states the company is opting out of the FBT rules, and including this with your income return covering the year the motor vehicle is:

• acquired, or

• first used for business use.

The election applies to motor vehicle arrangements between close companies and shareholder-employees until the company:

• stops using the motor vehicle for business use, or

• disposes of the motor vehicle.

Adjustments for private use may also need to be made for GST. Find out more in GST guide (IR375).