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Income Tax Act 2007

General collection rules - Employment-related taxes - Value of fringe benefits

RD 31: Motor vehicle test period

You could also call this:

“Tracking personal use of company cars to calculate benefits”

If your employer gives you a car to use for personal reasons, they need to figure out how much this benefit is worth. To do this, they can keep track of how you use the car for a certain time. This is called a test period.

The number of days you can use the car for personal reasons during the test period is used in some calculations. If your employer pays fringe benefit tax (FBT) every three months or once a year, the test period lasts three months. If they pay FBT based on their income year, the test period is any three months in a row during that year.

Your employer must choose a test period that shows how you typically use the car. They need to keep records of the test period, including which days you can use the car for personal reasons. Days when the car is used only for work don’t count as personal use days.

The results from the test period are used for the next three years. This three-year period starts at different times depending on how often your employer pays FBT.

If you start using the car for personal reasons 20% more than what was found in the test period, the three-year period ends early. Your employer can then start a new test period if they want to.

The Commissioner of Inland Revenue can tell your employer to stop using the test period results if they think the results don’t match how you’re actually using the car anymore.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520021.

Topics:
Money and consumer rights > Taxes
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“Rules for counting a day when calculating personal use of a work vehicle”

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Part R General collection rules
Employment-related taxes: Value of fringe benefits

RD 31Motor vehicle test period

  1. To establish the value of the benefit provided through a motor vehicle being made available to an employee for their private use, an employer may choose to record the details of the use of the vehicle by the employee for a test period.

  2. The number of days on which a vehicle is available for an employee’s private use that is ascertained in the test period is the number used in the calculation in section RD 29(2). For the calculation in section RD 29(4), the relevant number is the number of days ascertained in the test period multiplied by 4.

  3. If FBT is paid quarterly or annually, the test period is a quarter. If FBT is paid on an income year basis, the test period is 3 consecutive months of an income year.

  4. The employer must—

  5. choose a test period that shows, or is likely to show, a pattern of use of the motor vehicle by the employee that fairly represents the use of the vehicle by the employee over the whole of the applicable term; and
    1. keep a record of the test period, including accurate details of the days in the period on which the vehicle is available for the employee’s private use.

      1. In subsection (4), a day on which the vehicle is a work-related vehicle is treated as a day on which the vehicle is not available for private use.

      2. The number of days of availability for private use ascertained in the test period applies for a term of 3 years. The term starts, as applicable, as follows:

      3. if FBT is paid quarterly, on the first day of the test period:
        1. if FBT is paid on an annual basis, on the first day of the tax year in which the test period occurs:
          1. if FBT is paid on an income year basis, on the first day of the income year in which the test period occurs.

            1. The term referred to in subsection (6) is reduced if the number of days of actual private use of the motor vehicle is 20%, or more than 20%, higher than the number ascertained in the test period. In this case, the term ends on the last day of the applicable quarter, year, or income year. If the employer chooses to start another test period, the existing term ends just before the start of the new term.

            2. If the Commissioner considers that the result ascertained in the test period does not, or does no longer, fairly represent the actual private use of the motor vehicle by the employee, the Commissioner may notify the employer that the term will end on a particular date. Following notification, the employer must not use that result again.

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