Findex’s announcement at Hamilton Fieldays, coined UTE Tax 2.0 by commentators, highlighted how Inland Revenue’s proposed changes to Fringe Benefit Tax (FBT) would impact farmers' and tradies' utes. This spurred a minor media frenzy, which reached the Prime Minister. During an interview on the matter, the Prime Minister quashed speculation that the FBT rules for utes would change.
Under the original Inland Revenue proposal, a $70,000 farm UTE with mixed private and business use would have incurred an annual FBT cost of $4,000 at the proposed 26% FBT rate for petrol and diesel vehicles. For vehicles that cost $80,000 or more, the entire value would have been taxable, resulting in an annual FBT of at least $13,000.
The Prime Minister’s position will be welcome news to those faced with increased FBT assessments. The proposals also ran contrary to the recently announced Investment Boost incentive. Findex’s position was that many farming and tradie utes are tools of the trade and should be exempt from FBT or have a lower FBT rate applied to that of a standard motor vehicle. Findex was urging for more consultation.
Findex Tax Advisory Partner, Craig Macalister, said, “The FBT position adopted seemed to have a 'Featherston Street, Wellington' look and feel to it, rather than how this would impact farmers in Southland or tradies in Central Otago. Findex was concerned that the position of rural and tradie people dependent on utility vehicles as a necessity to derive their income did not seem to have been thoroughly considered. Further, the matter needed more transparency to be better understood by all people impacted by the proposals.”
There isn’t a lot of supporting information on what the Prime Minister’s statement will mean. That is, will the work-related ute exemption now remain? We will keep you posted as things develop.
The original article below, which explains the details of UTE Tax 2.0, was published on 18 June 2025.
The Government’s new Investment Boost initiative has been well received overall, allowing accelerated depreciation deductions for eligible assets. However, the benefit is being quietly undercut by looming changes to Fringe Benefit Tax (FBT) rules for utes and other work vehicles.
The proposed FBT changes, outlined in an April 2025 Inland Revenue Department (IRD) discussion document and set to be enacted in Budget 2025, repeal the current FBT exemption for work-related vehicles. In its place, a new system will categorise vehicles based on the split between personal and business use—with major potential tax implications.
These changes are at odds with the Government’s stated aim of stimulating investment through the Investment Boost.
While farmers are offered an Investment Boost for tax deductions, these FBT changes will hit them heavily in increased FBT. It’s contradictory and perplexing that this has been quietly accepted in the Budget.
As an example, a $70,000 ute used for both business and private purposes would attract an annual FBT charge of $4,072 under the proposed 26% rate for petrol and diesel vehicles. The situation becomes even more severe for higher-end models: a ute costing over $80,000 will be taxed as 100% private use, which could attract a staggering $13,297 per year in FBT.
This effectively neutralises the benefit of the Investment Boost.
Farmers are making buying decisions based on the depreciation benefit, but they’re largely oblivious to the tax grenade coming their way when the FBT proposals become law.
These utes aren’t luxury perks, they’re essential tools used to transport equipment, personnel, and animals. Yet the IRD appears locked in a paradigm that views any provided vehicle as a perk to be taxed, unless it’s an emergency vehicle.
In submissions to IRD, Findex argued that FBT should only apply when a genuine benefit is provided to staff, not when the vehicle is a necessary business tool.
In context, the proposed changes undermine the very policy—Investment Boost—that was introduced to support productivity. The existing work-related vehicle exemption already strikes the right balance.
Findex is calling on the Government to pause the rollout and engage in deeper consultation with sectors that rely on utes, including agriculture, construction, forestry, and the trades.
Although some abuse of the previous exemption did occur—the tidy-up has gone too far. We are now in a situation where businesses that genuinely need these vehicles to operate are being penalised, completely undermining the relief contained in Investment Boost.
Findex has committed to working alongside rural stakeholders, industry bodies, and policymakers to raise awareness and push for fairer treatment of essential work vehicles.
The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex.
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