Fringe Benefits Tax (FBT) on Company Cars

In 2026, the Australian Fringe Benefits Tax (FBT) year runs from **April 1 to March 31.** For many Australian business owners, the biggest FBT-related expense is the company car. If a staff member uses a company vehicle for personal trips (like supermarket runs or on the weekend), the ATO considers it a "benefit." Here is how to keep your FBT debt as low as possible this year.

The Electric Vehicle (EV) Exemption

The single biggest tax-saving opportunity in 2026 is the **EV and Plugin Hybrid (PHEV) exemption.** If your business provides a zero or low-emission vehicle that was first held after July 1, 2022 (and its value is below the Luxury Car Tax threshold), you may be exempt from paying FBT entirely. This allows your staff to have a high-value car without your business paying the usual 47% tax rate on the benefit.

What Counts as "Private Use"?

This is where the ATO catches many employers. Private use includes:

• **Commuting from home to work.** (Except for specific "tools-of-trade" vehicles like utes).
• **Weekend use.** (Any trip that isn't directly for business business).
• **Shopping or school runs.**

Calculating the FBT Debt

If you don't have an FBT-exempt vehicle, you must use one of two methods:

1. The Statutory Formula:** This is a flat 20% of the car's original purchase price, regardless of how many kilometres were driven for business. Simple, but often more expensive.
2. The Operating Cost Method:** This is based on the **actual private use percentage** of the car's running costs. You need a 12-week **logbook** for this method.

💡 Pro Tip: If your staff member makes an "employee contribution" towards the car's running costs (e.g., they pay for their own fuel), this reduces the FBT debt dollar-for-dollar. This is often the smartest way to zero-out your FBT liability.

Summary: Better Data, Less Tax

FBT is one of the most complex taxes in Australia, and the rules change almost every year. At PrepMyBook, we proactively audit our clients’ vehicle lists before the March 31 deadline to identify every possible exemption and saving. Let's make 2026 your most tax-efficient year yet.

Audit Your Car FBT Risk Today

Our tax specialists can help you analyze your company vehicle list and determine if an EV transition or an employee contribution plan will save you money. Let's protect your profit margins.

Talk to an FBT Specialist