The question starts with availability
This is an illustrative composite client situation. It does not describe one identifiable client or a result achieved by Pillar.
A New Zealand close company has a vehicle that an employee takes home most nights. The next day’s work may start away from the office, so keeping the vehicle at home is convenient. The business has a general instruction against personal trips, but it cannot readily show when the instruction was issued, which days the vehicle was available, or how use was checked.
The owner asks whether an overnight vehicle is automatically subject to FBT. A proposed FBT reform has also appeared in the news, which raises a second question: can the business use the proposed categories now?
The current return still starts with the existing availability rules. The proposed reforms introduced to Parliament on 10 September 2026 have a proposed application date of 1 April 2027. They need to complete the legislative process before becoming law, and their final form may change. A return prepared now should use the law that applies to its return period.
Private use includes more than weekend driving
Inland Revenue says FBT generally applies for each day a motor vehicle is made available for an employee’s private use. The employee does not have to make a private trip that day. Availability itself matters.
Travel between home and work is generally treated as private use. The detailed position can depend on where the employee’s work begins, why the vehicle is at home and what duties are performed during the journey. Inland Revenue’s IS 25/02 interpretation statement deals specifically with motor vehicles and home-to-work travel. A description such as “needed for work tomorrow” is not enough to resolve those facts.
Start a day-by-day record for the relevant quarter or income year. Note where the vehicle stayed, who could use it, the work destination, any call-out or emergency duty, private travel and periods when the vehicle was genuinely unavailable. Calendar entries, job records, location logs and odometer records can support the review, provided they describe the same vehicle and dates.
A work-related vehicle exemption has several conditions
A business may hear “work vehicle” and assume that business branding or a utility body settles the exemption. The current test requires more.
The 2026 IR409 guide describes a work-related vehicle as one with a gross laden weight of no more than 3,500 kilograms that is mainly designed to carry goods, or goods and passengers equally. A qualifying company identifier must be permanently and prominently displayed on the outside. A removable sign may not support that condition.
There must also be a written restriction on private use. The restriction needs to cover the relevant employees and vehicles, allow only the private use permitted by the rule, and be supported by regular checks. If the business allows broader private use on some days, those dates need to be identified. A policy that exists only in memory cannot show what employees were told or when it applied.
Vehicle specifications, photographs of permanent identification, the signed policy, staff communications and evidence of periodic checks belong in the first review pack. These records allow the accountant to test each condition without assuming an exemption from the vehicle’s appearance.
Entity type changes the review
FBT applies to benefits provided in an employment setting. Sole traders and partners who use a business vehicle personally usually account for private use through different income-tax rules. A company, including a close company, can have an FBT issue when a vehicle is available to a shareholder-employee or another employee.
Some close companies can elect out of the motor-vehicle FBT rules when the statutory conditions are met. IR409 describes an option involving one or two vehicles made available to shareholder-employees where the company provides no other fringe benefits. The timing of the election and the treatment of private use under the income-tax rules need to be checked. It should not be inferred from the number of vehicles alone.
Confirm the registered owner or lessee, the employing entity, every driver and whether the person is an employee, shareholder-employee, sole trader or partner. Also list any other benefits the company provides. This prevents a vehicle review from being built around the wrong taxpayer.
Keep the proposal separate from the current return
The Taxation (Annual Rates for 2026-27, FBT Simplification, FIF, Remedial Measures) Bill proposes a different category-based approach for motor vehicles from 1 April 2027. At 13 September 2026 it is a bill, so businesses should monitor its progress and prepare for possible system changes without applying the proposed treatment early.
For the current review, record the return period at the top of the working paper. Keep current-law evidence and any future implementation notes in separate sections. This makes it clear which rules support the filed position and which items are planning assumptions.
Pillar’s tax and compliance service can review the current FBT facts, return period and supporting records. If vehicle policies, payroll inputs or ledger coding also need attention, the Xero and accounting systems service may be relevant.
To discuss the vehicle and the period under review, use the published phone details or contact Pillar. Do not send vehicle logs, employee information, passwords or accounting files through the website form.