Quick answer
Fringe benefits tax applies when an employer — including a company providing a car to its director — makes a car available for an employee's private use. The FBT year runs 1 April to 31 March, and the rate is 47% for FBT years up to 31 March 2027. Limited private use of utes, vans and other eligible vehicles may be exempt, and eligible electric cars can be exempt but are still reportable.
Key points
- FBT applies to employers, including companies and trusts providing cars to directors or staff.
- FBT year: 1 April to 31 March. Rate: 47% for FBT years ending 31 March 2023 to 31 March 2027.
- Limited private use of a ute, van or other eligible vehicle may be exempt.
- Eligible battery electric cars can be exempt but remain reportable fringe benefits.
- FBT year
- 1 April to 31 March
- FBT rate
- 47% (to 31 March 2027)
- Utes and vans
- Limited private use may be exempt
- Electric cars
- Eligible ones exempt, still reportable
What is fringe benefits tax?
Fringe benefits tax (FBT) is a tax employers pay on certain non-cash benefits they give employees. A car is the classic example. If your business makes a car available for an employee’s private use, that private use is generally a car fringe benefit, and the employer may owe FBT on it.
Two things often surprise owners:
- Directors count. If your company provides a car to you as a director or employee, the company may have an FBT liability for your private use.
- “Available” can be enough. A car garaged at an employee’s home may be treated as available for private use, even on days it isn’t driven.
The key numbers
| Item | ATO figure |
|---|---|
| FBT year | 1 April to 31 March |
| FBT rate | 47% for FBT years ending 31 March 2023 to 31 March 2027 |
The rate is applied to the grossed-up taxable value of the benefit, which is why FBT on a car can be significant. Your accountant calculates the taxable value using one of the ATO’s methods for valuing car fringe benefits.
Who pays FBT — and who doesn’t?
| Business structure | Owner’s own use | Employees’ use |
|---|---|---|
| Sole trader | No FBT — claim business share only | FBT may apply |
| Partnership | No FBT for partners | FBT may apply |
| Company | FBT may apply to directors who are employees | FBT may apply |
| Trust | FBT may apply to employees, including beneficiaries employed by the trust | FBT may apply |
The ute and van exemption
This is the one most trades businesses care about. The ATO says an employee’s limited private use of a ute, van or other eligible vehicle may be exempt from FBT. In practice this usually covers:
- travel between home and work;
- private trips that are minor, infrequent and irregular — like dropping off a parcel on the way home.
It generally doesn’t cover regular weekend use, holidays or the vehicle being the family’s main car. The exemption also depends on the vehicle being an eligible type — typically commercial vehicles not designed principally to carry passengers. Check your specific vehicle and use pattern with your accountant. See ute finance and van finance.
Electric cars
The ATO’s electric cars exemption means no FBT on private use of an eligible car that:
- is a zero or low emissions vehicle (battery electric or hydrogen fuel cell);
- was first held and used on or after 1 July 2022; and
- was valued below the luxury car tax threshold for fuel-efficient vehicles at its first retail sale.
From 1 April 2025, plug-in hybrids are no longer treated as zero or low emissions vehicles for this exemption. And the benefit is still reportable. The ATO has also published details of a 2026–27 Budget proposal to change the electric car treatment from 1 April 2027, which it marks as not yet law. See electric vehicle finance.
Novated leases and FBT
A novated lease is a salary-packaging arrangement in which the employer makes car lease payments from the employee’s salary. The employer still has FBT obligations for the car benefit. Employee after-tax contributions can reduce the taxable value, depending on how the arrangement is set up.
Reducing FBT the legitimate way
- Choose the right vehicle. Work utes and vans with limited private use may be exempt; eligible EVs may be exempt.
- Keep records. Logbooks and odometer readings support the valuation method chosen.
- Consider employee contributions. After-tax contributions from the employee can reduce the taxable value.
- Review annually. Use patterns change; an exemption that applied last year may not this year.
Illustrative example: a building company’s two vehicles
Illustrative only. A building company provides a single-cab ute to its site supervisor, who drives it home and occasionally makes a minor private stop on the way. Its accountant confirms the limited private use exemption applies. The company also provides a sedan to its estimator, who uses it on weekends; that’s a car fringe benefit, and the company accounts for FBT on it for the FBT year ending 31 March. Choosing the vehicle type for each role kept the FBT bill to one vehicle.
Record-keeping that makes FBT easier
FBT is far easier to manage with good records. For each vehicle provided to employees:
- keep the purchase or lease documents and the date it was first provided;
- keep odometer readings at the start and end of each FBT year;
- keep logbooks where the valuation method relies on them;
- record any employee contributions toward running costs;
- for exempt vehicles, keep evidence of the vehicle type and how private use is limited.
Sole traders: no FBT, but records still matter
Sole traders and partners don’t pay FBT on their own private use, but they still need a business-use figure to claim GST credits and deductions correctly. See business use and logbooks for the ATO’s logbook rules.
Choosing vehicles with FBT in mind
FBT should be one input into which vehicle you buy, not an afterthought. If you’re weighing a car against a ute or van, or petrol against electric, talk to your accountant before you commit. Once you know what you need, tell us about the vehicle and we’ll explain the finance options.
There’s no credit check to enquire. Your details stay with one specialist rather than being spread among lenders, and that person calls you to understand who’ll drive the vehicle and how. Accurate answers about private use and your business structure help us — and your accountant — get it right. Start your enquiry.
Frequently asked questions
Do sole traders pay FBT on their own car?
No. FBT applies to benefits provided to employees. A sole trader or partner isn't their own employee; instead they claim only the business-use portion of vehicle costs.
Does a director of my company pay FBT on the company car?
The company, as employer, may be liable for FBT if the director uses the car privately. Directors drawing a salary are usually employees for FBT purposes.
Is driving a work ute home an FBT problem?
Often not. The ATO says limited private use of a ute, van or other eligible vehicle may be exempt. Travel between home and work and minor, infrequent private use are typical examples, but check the conditions with your accountant.
When is the FBT return due?
The FBT year ends on 31 March. Lodgement and payment dates depend on whether you lodge yourself or through a tax agent, so check the ATO's dates or ask your agent.