• Hire cars

    Subsection 7(7) of the FBTAA provides that hire cars, such as Comcar cars or cars hired from a commercial hiring company, are not covered by the car fringe benefit provisions unless there are successive hiring periods that result in a substantial continuity of hiring the car. If entities hire a car for less than three months, they are not considered to 'hold' the car and, therefore, it will not result in a car fringe benefit.

    The facts of each case must be examined to determine whether there is substantial continuity of hiring the car that amounts to a hiring period of three months or more. The following two examples demonstrate this point.

    Example 1

    A car is hired for a total of four months from February until May. This car should be treated as a car fringe benefit even though the car is only hired for two months during FBT year. When looking at the whole hire period there is a substantial continuity of hiring exceeding three months.

    Example 2

    A car is hired for two months and then returned for three weeks and then rehired for another two months. This car should be treated as a car fringe benefit even though the car is hired for less than three months each time. When looking at the total hire periods, there is substantial continuity of hiring exceeding three months.

    Cars that are hired for periods that do not result in substantial continuity of hiring of three months or more are taxed under the expense payment fringe benefit provisions (if the employee is reimbursed the cost of hiring the car) or the residual fringe benefit provisions (if the hiring contract is in the employer's name).

      Last modified: 17 Jul 2012QC 21998