Company Vehicle FBT is Changing – What Business Owners Need to Know
If your business owns vehicles that employees or shareholder-employees can take home or use privately, there are some important tax changes on the horizon.
The Government has introduced proposed changes to New Zealand's Fringe Benefit Tax (FBT) rules, with the new motor vehicle rules intended to apply to benefits provided from 1 April 2027.
While the legislation is still going through Parliament, now is a good time to understand what's being proposed.
Why are the FBT rules changing?
The current vehicle FBT rules can be complicated.
Businesses may need to keep track of when vehicles are available for private use, exempt days and whether a particular vehicle meets the requirements for an exemption.
The proposed rules are intended to simplify this by introducing a category-based approach to determining the extent of private use.
In other words, rather than continually counting individual private-use days, the FBT treatment would be based more closely on how the vehicle is generally available and used.
Taking a work vehicle home still matters
One area business owners need to pay particular attention to is vehicles that employees take home.
Under the proposed legislation, travel between home and work is generally considered private use, although there are specific rules dealing with different circumstances and levels of private availability.
That means it's important not to assume that a ute or van is automatically outside the FBT rules simply because it's primarily a work vehicle.
Vehicle branding is also specifically addressed in the proposed legislation, so businesses may need to look at how their vehicles are identified and the conditions they place around private use.
Different rates for different types of vehicles
Another significant proposal is to change the FBT vehicle valuation rates.
The proposed annual cost-price rates are:
Standard vehicles – 22.8%
Hybrid vehicles – 19.6%
Electric vehicles – 17.0%
Different rates are also proposed where the tax book value method is used.
This means the type of vehicle a business chooses could have a greater impact on its future FBT position.
Don't forget Investment Boost
There is another vehicle tax change already in place that businesses should be aware of.
Investment Boost has been available since 22 May 2025 and allows businesses to claim an immediate deduction of 20% of the cost of eligible new assets, with normal depreciation applying to the remaining 80%.
Eligible business vehicles may qualify.
Special FBT valuation rules already apply where Investment Boost has been claimed on a vehicle, so purchasing a new business vehicle isn't necessarily just a question of choosing the make, model and finance option.
The tax treatment is worth considering as well.
What should businesses be doing now?
There is no need to panic or immediately change your vehicle arrangements. The proposed FBT changes still need to work their way through the legislative process.
However, businesses with company vehicles should start thinking about:
Which vehicles employees or shareholder-employees take home
What private use is currently permitted
Whether vehicle-use policies are documented
Which vehicles are branded
Whether the business currently pays FBT on its vehicles
Whether Investment Boost has been claimed on recently purchased vehicles
Whether future vehicle purchases are likely to be petrol/diesel, hybrid or electric.
For some businesses, this could be a good opportunity to review their entire vehicle setup rather than simply waiting until April 2027.
Not sure how your vehicles will be affected?
FBT has never been the easiest area of tax to understand – and that's exactly why these changes are being proposed.
At Cross Group, we can help you look at your current company vehicles, how they're being used and what the proposed changes could mean for your business.
Talk to us before 1 April 2027 so you know where you stand and can plan ahead rather than being caught out by the changes.
The proposed FBT changes discussed above are contained in legislation currently before Parliament and may change before becoming law.