Understand how Fringe Benefits Tax (FBT) applies to company vehicles, exemptions, record-keeping, and car parking benefits so your business stays compliant .
Fringe Benefits Tax and Company Vehicles: Key Rules for Employers
Company cars remain one of the most common benefits employers provide, but they often come with a significant tax cost. When a company vehicle is available for an employee’s private use, it generally creates a Car Fringe Benefit, which is subject to FBT at 47%.
When a Car Fringe Benefit Exists
A car fringe benefit arises when a car is held by an employer—meaning it is owned, leased or under a genuine novated lease—and is available for an employee’s private use.
What Counts as a Car?
A “car” for FBT purposes includes motor-powered road vehicles designed to carry:
- Less than one tonne, and
- Fewer than nine passengers
This includes:
- Sedans and station wagons
- Panel vans and utilities (under one tonne capacity)
- Goods vehicles and passenger vehicles under the thresholds
- Four-wheel drive vehicles meeting these specifications
Motorcycles and vehicles designed to carry one tonne or more are not classified as cars.
When Is a Car Considered Available for Private Use?
Private use includes:
- The car being garaged at the employee’s home (automatically private use)
- The employee having permission to use the car privately
- Any non-business travel, including minor personal trips
If a company vehicle is available for any private use, an FBT liability is likely.
FBT Exemptions for Company Cars
Some vehicles or circumstances may qualify for exemption:
- Electric Vehicle Exemption
EVs may be exempt if:
- They are eligible zero or low-emissions vehicles
- They cost below the luxury car tax (LCT) threshold for fuel-efficient vehicles
- $91,387 for 2024–25 and 2025–26
- Work-Related Travel Exemption for Certain Vehicles
Some vehicles are exempt where private use is strictly limited. These include:
- Taxis
- Panel vans
- Utes and vans under one tonne not designed mainly for passengers
To qualify, private travel must be minimal and meet ATO guidelines, such as:
- No more than 1,000 km private use per year
- No private trip over 200 km return
- Home-to-work trips with no more than a 2 km detour
- Vehicle value must be below the LCT threshold
- The vehicle must not be provided under salary packaging
Employers should have a policy limiting private use and evidence that employees comply.
Record-Keeping Requirements
To support your FBT calculations, employers should ensure:
- A valid logbook is maintained (if using the operating cost method)
- Odometer readings are taken at 31 March each year
- Evidence is kept demonstrating limited private use for exemption claims
- Policies and employee declarations are documented
- Proper records help avoid FBT penalties and incorrect assessments.
How to Calculate FBT on Company Cars
You can choose the method that results in the lowest taxable value.
- Statutory Formula Method
Applies a flat 20% statutory rate to the car’s base value.
The base value includes:
- Original cost
- GST and delivery costs
- Non-business accessories
It excludes registration, stamp duty and trade-ins.
- Operating Cost (Logbook) Method
FBT is calculated on:
Total operating costs × Private use % – Employee contributions
Operating costs include:
- Fuel
- Maintenance
- Depreciation (deemed)
- Interest (deemed)
This method often benefits high-use business vehicles.
Car Parking Fringe Benefits
Employers may also incur FBT on car parking provided to employees.
A car parking fringe benefit occurs when:
- The employee parks at or near the workplace
- Parking is within 1 km of a commercial station charging above the FBT threshold
- The car is parked for more than 4 hours between 7am and 7pm
- The employee drives between home and work at least once
Car Parking FBT Exemptions
You may be exempt if:
- The Employee Has a Disability
They must have a valid accessibility permit and legal entitlement to disability parking.
- You Are a Small Business
You qualify if:
- You are not a government body or public company
- Your turnover is under $50 million, or gross income is under $10 million
- Parking is not provided in a commercial car park
- You Are an Exempt Employer
Such as:
- Registered charities
- Public benevolent institutions
- Not-for-profit hospitals
- Public ambulance services
- Public educational institutions
- Minor Benefits Exemption
If provided infrequently and valued under $300, it may be exempt.
Conclusion
Company vehicles can provide valuable benefits to employees but they also create significant Fringe Benefits Tax obligations. Understanding when a car or parking benefit triggers FBT, what exemptions apply, and which calculation method minimises your liability is essential for compliance.
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