How to Avoid FBT on a Company Car (Without the Headache)

How to Avoid FBT on a Company Car : If you’ve ever looked into giving yourself or an employee a company car, you’ve probably stumbled across three dreaded letters: FBT – Fringe Benefits Tax.

It’s one of those tax rules that can trip up even the most well-meaning business owner. But the good news? There are a few smart, legit ways to avoid or reduce FBT on your company car – without ending up in hot water with the ATO.

How to Avoid FBT on a Company Car


Let’s break it down.

Wait – What Is FBT Anyway?

FBT is a tax that applies when an employer provides a non-cash benefit to an employee – like the personal use of a company vehicle. If you (or your team) are using the business car to commute, run errands, or head to the beach on the weekend – that’s private use. And that’s where the tax kicks in.

But not all car use is treated the same. With the right setup, you can avoid paying more than you need to.

1. Stick to Work-Only Use

The simplest way to steer clear of FBT? Don’t use the car privately. That means:

  • The car stays on site after hours

  • It’s only used during work hours and for business-related trips

  • No school runs, weekend getaways, or ducking off to the supermarket

The ATO takes “work-only” use seriously – and you’ll need evidence to back it up.

✅ Tip: Keep a policy in writing and make sure employees sign it.

2. Use an Exempt Vehicle

Not all vehicles trigger FBT. Certain work-specific cars – like utes, vans, or dual cabs – might qualify for FBT exemption, especially if they’re not designed for private use.

Here’s the trick: the private use still has to be minimal and infrequent. A quick stop for a loaf of bread on the way home? Fine. Towing your caravan to Byron Bay? Probably not.

Oh, and here's a win for the EV fans: electric vehicles under the luxury car tax threshold can be FBT-free, thanks to recent changes. Just make sure you tick all the eligibility boxes.

Want the full breakdown? Check out our guide on car fringe benefits.

3. Keep a Rock-Solid Logbook

If the car is used privately, your next best move is a logbook. It’s a bit of admin, but it can seriously reduce your FBT.

You’ll need to record:

  • Every trip (with date, distance, purpose)

  • Whether it was for work or personal use

  • A 12-week sample that reflects typical usage

The more business use you log, the less FBT you’ll pay.

4. Compare the Methods

There are two main ways to calculate FBT on a car:

  • Logbook method – based on actual business use

  • Statutory method – a flat 20% of the car’s base value

Which one’s better? Depends on how the car is used. We can help you figure that out.

Need a Hand?

At Future Advisory, we help business owners get smart with cars, tax, and compliance – so you can spend less time stressing and more time driving (legally, of course).

Location: Suite 26/68 Victor Cres, Narre Warren VIC 3805, Australia

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