.png)
Company Cars and Fringe Benefits Tax: What Employers Need to Know
This guide explains the practical issues behind company cars and fringe benefits tax: what employers need to know. It is written for Australian readers, including business owners and families in Perth. Your own records and circumstances will determine the tax outcome, so use the steps below to prepare questions for a tailored review.
A work car can still have private use
Fringe benefits tax can apply when an employer makes a car available to an employee for private use. The question is not merely who bought the vehicle or how many business trips it makes. Garaging a car at or near an employee's home can count as making it available for private use.
An employer can face FBT even if the car is mainly used for client visits. The critical facts include whether the employee had access to it for private travel during the FBT year.
What counts as private travel?
Ordinary travel between home and a regular workplace is generally private. Weekend trips and family use are also relevant. Restrictions in a vehicle policy help, but actual availability and records matter. A director who is also an employee can create FBT questions in the same way as other employees.
A trip diary and a written vehicle policy can help explain use. However, a policy banning private use should be supported by the way the vehicle is actually stored and driven.
Evidence of private availability
Document who could use the vehicle and when:
- Where the car was garaged overnight.
- Whether private or family travel was allowed.
- Changes in the employee's access.
- Any periods the car was unavailable.
Work out the value and keep evidence
The statutory formula and operating cost methods can produce different taxable values, and the operating cost method relies on suitable records, including a valid logbook where applicable. Keep purchase and lease documents, running costs, employee contributions and dates of availability. The FBT year runs from 1 April to 31 March, so do not treat it as identical to the income tax year.
The operating cost method can be useful where business use is high, but it calls for detailed evidence. The statutory formula method uses a different calculation. Ask for both estimates before choosing a method.
Utes and electric vehicles need separate checks
Limited private use of some eligible commercial vehicles can be exempt if the conditions are met. Some eligible electric cars may also qualify for an exemption, subject to the rules in force and reporting requirements. Vehicle type or an employer's label alone is not enough to assume no FBT.
Different vehicles have different rules, and conditions for concessions or exemptions should be checked carefully. A ute used regularly for private weekends will not necessarily meet a limited private use condition.
Review arrangements before handing over the keys
Agree who may drive the car, where it is garaged and how private use will be recorded. Run an estimate before choosing salary packaging or a vehicle allowance. A straightforward record keeping process is usually easier than reconstructing trips at year end.
Agree how tolls, fuel cards, parking and employee contributions will be recorded. Small omissions throughout the year can make the return harder to prepare.
Records for an FBT calculation
Keep the information needed to test the method:
- Purchase or lease documents.
- Fuel, servicing and running costs.
- A valid logbook where required.
- Employee contributions and receipts.
Talk through the actual arrangement
Zavik can review employer vehicle arrangements through its FBT service. See the ATO car FBT guidance for examples of availability and private use.
Review the arrangement when an employee changes role or takes the vehicle home for the first time. A calendar reminder before 31 March provides time to collect records.
Availability is as important as mileage
An FBT car benefit can arise on a day a car is available for private use even if the employee does not take a private trip that day. This is why overnight garaging and access to the keys matter. Review who can use the car during leave and weekends, and document any genuine restrictions. Actual circumstances should support the written policy.
Logbooks and operating costs
If using the operating cost method, employers need an appropriate business use percentage and supporting records. Running costs, ownership costs and employee contributions also affect the calculation. A logbook from a valid period may be needed to establish business use. Missing records can leave an employer unable to use the method they expected.
An employer car versus an allowance
Providing a company car, reimbursing expenses and paying a car allowance are different arrangements. An allowance may be taxable through payroll, while access to a company car can create FBT. Neither option should be chosen only because it sounds simpler. Compare total costs, administration and the employee's likely use before agreeing to a package.
End of FBT year review
Before 31 March, list every vehicle available to staff or directors, including vehicles added or disposed of during the year. Check when each person had access, whether any employee contributions were made and whether exemptions are supported. Reconcile the vehicle list against accounting records and payroll. Fix missing documents before preparing the return.
Frequently asked questions
Is driving home in a company car private use?
Ordinary travel between home and a regular workplace is generally private, and garaging the car at home can mean it is available for private use.
Are all utes exempt from FBT?
No. The vehicle and actual private use must meet the relevant exemption conditions.
When does the FBT year end?
The FBT year ends on 31 March, so employers need to keep vehicle records separately from the normal income tax year.
Does a written no-private-use rule prevent FBT?
A written rule alone is not enough. Actual access, garaging and use should support the policy.
Can employee payments reduce a car benefit's taxable value?
They can in some circumstances, but the payment and records need to meet the applicable rules.
Final Thoughts
A company car can create an FBT obligation when an employee or director has private use or access, even if the vehicle is mostly used for work. The way it is garaged, the dates of availability and the records of business travel all matter. Keep a practical vehicle policy, but check that actual use matches it. Before the FBT year ends on 31 March, review each car, any employee contributions and the evidence needed for a valuation method or exemption. Zavik can help assess the arrangement and prepare a calculation based on the facts rather than assumptions.
Get in Touch Today
Take the first step toward better tax and accounting solutions. Whether you're an individual or a small business entity, we're
here to help.