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Findex Tax Advisory Partner Criag Macalister.
There's no doubt that vehicle manufacturers at Fieldays saw a steady stream of rural folk treading the boards.
Post-event anecdotes suggest that many signed on the dotted line, no doubt taking advantage of the Government's investment boost initiative, offering 20% tax relief over the coming year.
However, farmers and tradies buying utes, often on the advice of their accountants, may be wishing they had paid a little more attention to the recent budget fine print, meaning they may inadvertently end up owing thousands of dollars in fringe benefit taxes (FBT).
Under subtle changes, scheduled to kick in next year, farmers with a mixed used farm ute costing $70,000 will be hit with an annual FBT bill of $4,072 at the proposed 26% rate for petrol and diesel vehicles.
Findex tax advisory partner Craig Macalister said the repeal of a work-related vehicle FBT exemption for mixed private and business use, committed to in the Government's latest Budget, will result in tax implications, that he describes as a "grenade", for people who use their utes for business.
"Those farmers who were buying vehicles at Fieldays, undoubtedly looking forward to a reduced cost thanks to depreciation deductability, were likely 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 $6,000 in extras, or American muscle trucks with big price tickets - will be classified as 100 percent taxable, resulting in a staggering $13,297 in FBT per year in [taxable benefit]."
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' - rather 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," said Macalister.
Federated Farmers has joined the fray, calling on Revenue Minister Simon Watts to urgently rule out the changes to FBT, claiming it could quickly become 'Ute Tax 2.0'.
Federated Farmers transport spokesperson Mark Hooper says it seems to be pushed through by stealth.
“Farmers will be incredibly concerned that the Government are consulting on new rules that could add thousands of dollars of additional tax payments each year.
“This would be a huge cost for farmers, tradies and other productive New Zealanders and unfairly punish the legitimate use of these work vehicles.
“The previous government’s Ute Tax was bad enough, but at least that was a one-off cost. These new FBT charges would be annual and cost farmers an arm and a leg each year.”
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