Circumstances Under Which the Value of Private Use of a Company Vehicle is Deemed to be Nil
We have had some recent enquires as to the circumstances under which an employee would not have to pay fringe benefit tax on the use of a company owned vehicle. The value of the private use of the motor vehicle by an employee is deemed to be nil, if all three of the following requirements are met:
- The motor vehicle is available and used by employees of the employer in general (i.e. is a pool car generally used by the employees for business purposes and which is not allocated to a particular employee);
- The private use of the motor vehicle by the employee is infrequent or merely incidental to business use; and
- The motor vehicle is not normally kept at or near the residence of the employee when not in use outside of business hours.
The value of private use of the motor vehicle by an employee is deemed to be nil, if:
- The nature of the employee’s duties are such that the employee is regularly required to use the motor vehicle for the performance of those duties outside normal hours of work; and
- The employee is not permitted to use that motor vehicle for private purposes other than:
- Travelling between his or her place of residence and his or her place of work; or
- Private use which is infrequent or is merely incidental to its business.
It is important to note that the no-value rule will only apply if the use outside of an employee’s normal working hours occurs ‘regularly’. What constitutes ‘regular performance of duties outside normal work hours’ is not standard and must be assessed on a case by case basis, taking into account the particular job and its responsibilities. The onus rests on the employer to prove that the requirements for the nil value provisions have been met.