New ute owners warned of looming 'tax grenade'
Photo:
Sergio Rota/ Unsplash
Farmers and tradies buying utes under the
government's Investment Boost initiative
will be hit by a "tax grenade" in the form of a fringe benefit tax (FBT), according to an expert.
Findex tax advisory partner Craig Macalister said the repeal of a work-related vehicle FBT exemption for mixed private and business use in the government's latest Budget will result in tax implications for people who use their utes for business.
Under the change, farmers with a mixed used farm ute costing $70,000 will be hit with an annual FBT bill of $6370, at the proposed 26 percent rate for petrol and diesel vehicles.
"Farmers are buying vehicles at Fieldays, looking forward to a reduced cost thanks to depreciation deductibility, but oblivious to the tax grenade coming their way in 12 months," Macalister said.
"Worse still, any vehicle over $80,000 - such as a $75,000 ute with $6000 in extras - will be classified as 100 percent taxable, resulting in a staggering $21,060 in FBT per year."
Macalister said consultation on the tax changes had not been given inadequate consideration, resulting in a policy that over-taxed essential business assets.
"In our view, the use of the current FBT exemption strikes the right balance for work-related vehicles. Scrapping it will hurt farmers and other industries reliant on utility vehicles," he said.
"These utes are not perks or 'Remuera tractors' - they're essential tools for carrying equipment, personnel and of course dogs on and off the farm.
"Yet, the IRD seems locked in a paradigm that views any provided vehicle as a perk to be taxed, unless it's an emergency vehicle."
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