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Episode 1 - Introduction to FBT and Motor Vehicles

This is a transcript for the first episode of the Crossed Wires Trilogy on FBT and motor vehicles. This video is for businesses learning how FBT applies to motor vehicle benefits provided to employees.

Visual:

Inland Revenue’s logo displays. The title appears: “Fringe Benefit Tax (FBT) and Motor Vehicles”. The sub-heading then appears: “Part 1 – The Fellowship of FBT (An Introduction to Fringe Benefit Tax)”.

An image of the Crossed Wires premises appears along with images of Chris Cross, Veri Cross and Trevor in the foreground. Chris looks like your everyday hipster IT professional with a beard that would not be out of place in any craft beer bar. Veri seems more serious and is likely the brains behind Crossed Wires. Trevor is devilishly handsome and exudes both confidence and authority. You know Trevor is not going to put you wrong.

The foreground images are replaced by a map of New Zealand with red lines indicating travel from Wellington to other centres around New Zealand.

The background image of the Crossed Wires premises is replaced by a picture showing financial data which then changes to an image of a handshake. The background then changes again to an image of people sitting.

The background reverts back to the image of the Crossed Wires premises. A green car and a red car drive onto the screen in front of the Crossed Wires premises.

Audio:

Narrator

Meet Chris and Veri Cross. They are shareholder-employees of the IT company, Crossed Wires Limited.

Trevor is the company accountant. He is an expert when it comes to tax.

Chris and Veri travel frequently for work to meet with investors, clients and to attend conferences, so they buy two cars for their business.


Visual:

The green car is enlarged and the words “Crossed Wires” appear in signwriting on the side and front of the car. The cars then drive away.

Audio:

Narrator

Chris thinks that if they sign-write their vehicles they won’t have to pay tax on the use of them.

Veri isn’t sure that this is the case. Trevor is here to help clear things up.


Visual:

A starburst with the words “whaddyareckon Trevor?” inside appears over the top of the Crossed Wires premises background.

Audio:

Crowd

Whaddyareckon Trevor?


Visual:

Trevor nonchalantly appears as do the words “fringe benefit tax (FBT)” over the Crossed Wires premises background. Veri appears surrounded by bags of money. The words “PAYE” appear next to Veri.

A second image of Veri appears next to a green car and the words “PAYE” which are then stamped out with a big red cross. The words “FBT” appear next to that image.

Audio:

Trevor

First it helps to understand a bit about fringe benefit tax or FBT.

Salary or wages paid to employees are taxed as PAYE. Having the use of a car isn't salary or wages so it isn't taxed as PAYE.

To make things fair, if you provide an employee with a non-cash benefit it is taxed as FBT.


Visual:

The images disappear, leaving Trevor in front of the Crossed Wires premises.

Chris drives across the screen in his green car. He stops the car outside the Crossed Wires premises. Chris then drives off.

The background image changes to a school with a children’s playground in front. Adults and children are in the playground. Chris drives the green car up to the playground and drops off a child. He then drives off.

The background reverts to the Crossed Wires premises. Chris drives by again in the green car. The green car is sign-written with the words “Crossed Wires” on the side and bonnet. Chris then drives off.

Audio:

Trevor

The general rule for FBT is if you provide an employee with a motor vehicle and it is also made available for private use, then FBT is payable.

It doesn’t matter whether the vehicle is sign-written!


Visual:

Trevor graces the screen again in front of the Cross Wires premises. The words “available” and “use” appears on the screen. The word “use” is then obliterated by a big red cross. The word “use” and the big red cross then disappear.

Audio:

Narrator

But if the vehicle isn't used, there's no FBT to pay, right?

Trevor

This is a really important point. FBT focuses on whether you make the vehicle AVAILABLE for private use.

This means FBT can apply even when the vehicle isn't actually used privately.


Visual:

The words “available” and “access” and “permission” appear on the screen. Veri also appears. The words and Veri then disappear.

Audio:

Trevor

A vehicle is “made available” when the employee has access to the vehicle and permission to use it for private purposes.


Visual:

Chris and Veri appear in front of the Crossed Wires premises. The red car and the green car drive onto the screen.

The Crossed Wires premises background disappears and is replaced with an image of a handshake. The red car is enlarged. The background then reverts back to the Crossed Wires premises and the red car returns to normal size.

The background changes to a person sitting down. It then changes again to the school and playground. The green car is enlarged. The green car returns to normal size.

The background reverts to the Crossed Wires premises. The cars then drive off. Chris and Veri then disappear.

Audio:

Narrator

Back to Chris and Veri's situation. Chris and Veri agree that her car will only be available for business purposes, and Chris's car for both business and private purposes. So while the cars are identical, the FBT treatment is very different.

Let's check if FBT applies to Chris's car.


Visual:

A starburst appears in front of the Crossed Wires premises with the words “Whaddyareckon Trevor?”

Audio:

Crowd

Whaddayareckon Trevor?


Visual:

The Crossed Wires building background is replaced by Chris’s house. Chris drives the green car into the driveway. Trevor is grinning impishly in the foreground.

The background then changes to the Crossed Wires premises. Trevor lounges in the foreground. The word “access” appears on the screen. A big green tick appears next to it. The word “permission” appears, also with a big green tick. A plus sign appears between the two words and the word “available” appears at the top of the screen. “FBT” appears at the bottom of the screen.

Audio:

Trevor

Chris takes the car home each night, so he has access to the vehicle.

Chris and Veri agreed Chris can use the vehicle for whatever he likes, so he has permission too.

Since Chris has both access to the car, and permission to use it privately, it is made available to him and FBT applies.


Visual:

The Crossed Wires premises appear in the background. Veri appears and her sporty red car parks in front of the premises. The red car then drives off.

Audio:

Narrator

What about Veri’s car, does Crossed Wires have to pay FBT?


Visual:

A starburst appears in front of the Crossed Wires premises with the words “Whaddyareckon Trevor?” inside.

Audio:

Crowd

Whaddayareckon Trevor?


Visual:

The Crossed Wires premises are in the background. Trevor is smiling in the foreground. The background changes to an underground car park building. Veri backs the red car into the car park.

The background then reverts to the Crossed Wires premises with Trevor in the foreground. A large typed document, clearly a letter then appears over the background.

Audio:

Trevor

Veri leaves her car at work overnight, and only uses it for business travel.

Veri has a letter from Crossed Wires to confirm she is not allowed to use it for personal travel.


Visual:

Trevor materialises against the backdrop of the Crossed Wires premises. The words “access” and “permission” appear. The word “permission” is squashed by a big red cross. The word “available” appears on the screen. That too becomes concealed by a big red cross. Then “FBT” appears and receives the big red cross treatment.

Veri hoons past the Crossed Wires premises on her motorcycle.

Audio:

Trevor

Because Veri doesn't have both access to the car, and permission to use it for private purposes, it isn't made available to her and there is no FBT to pay.

It helps that Veri has her own transport too – she doesn’t need to use the car privately.


Visual:

Against the background of the Crossed Wires premises, the word “access” appears with a big green tick next to it. The word “permission” also appears with a big green tick next to it. The plus symbol appears between access and permission and “FBT” appears at the bottom.

Audio:

Narrator

So remember, if an employee is given access to a work vehicle, and permission to use it privately, FBT applies.


Visual:

The web address for the Inland Revenue page on FBT and directions for finding Interpretation Statement IS 17/07 on the website are shown.

Audio:

Trevor

For more information about FBT go the IRD website.

You can check out the whole Crossed Wires stories in Interpretation Statements. Look for the search keyword “interpretations”.