Inland Revenue (IR) has recently clarified the rules around using a private vehicle for work travel. The key message? Travel between home and work is considered private and not tax-deductible, unless it meets specific conditions. If an employer provides a vehicle that an employee can use privately (including commuting), Fringe Benefit Tax (FBT) may apply. However, there are exceptions where travel from home to work can be considered work-related.
When is Travel Considered Work-Related?
- Carrying essential tools or equipment
- If your job requires you to transport bulky tools or equipment that cannot be left at work, your travel may count as work-related.
- Itinerant (on-the-go) work
- If you don’t have a fixed workplace and regularly travel between different sites (such as tradespeople or consultants), your travel may be considered part of your work.
- Emergency call-outs
- If you’re required to respond to emergencies outside normal hours, such as a doctor or electrician, then travel to the emergency site may be classed as work-related.
- Your home is a workplace (more than a home office)
- If your home is a key place of business, not just a home office, travel from home to another work location may be considered work-related.
- This could apply if you see clients at home, store stock or equipment there, or use it as a business base.
- Simply having a desk at home does not qualify - your home must be essential to running your business.
Fringe Benefit Tax (FBT) for Work Vehicles
If a business provides a vehicle for an employee’s private use, FBT usually applies. However, if the travel meets the work-related rules above, FBT might not be required.
What Should Employers Do?
- Have clear policies on vehicle use.
- Keep good records to show whether travel is for work or personal use.
- Review vehicle use regularly to avoid unexpected tax bills.
If you’re unsure whether your travel qualifies as work-related, or if FBT applies to a company vehicle, get in touch with our team - we’re here to help!