Starting 1 April 2027, the way Fringe Benefit Tax (FBT) is calculated for staff vehicles is getting a massive shake-up.
The best part is you won’t have to meticulously track and measure exactly how much vehicles are for private use.
Instead, your FBT obligation will be determined by how the vehicle is mainly used.
At this stage we don’t know what is meant by “mainly” or what evidence will be required to support that but there will undoubtedly be specific guidance soon and we will cover that when available
The new rules sort company vehicles into six usage categories, each with a specific “inclusion rate.” Here is how they break down:
| Vehicle category & use case | Branding required? | FBT Inclusion rate |
| Full Private Use (perk vehicles) Mainly for personal use. |
No | 100% |
| Partial Private Use Mainly for business, but personal use is allowed on rostered days off, public holidays, leave, and daily commuting. |
Yes | 35% |
| Limited Private Use (farm vehicles) Mainly for farm operations on farmland. Must be owned by a closely-held farming company and used by a shareholder-employee. |
No | 35% |
| Minor Private Use Business vehicles where personal use is strictly limited to commuting to and from a single, fixed worksite. |
Yes | 20% |
| Minor Private Use (Multiple Worksites Business vehicles where personal use is strictly limited to commuting, but the nature of the work requires traveling across multiple worksites. |
Yes | 0% |
| No Private Use pool cars) Vehicles kept exclusively for business use and shared among staff. No personal use allowed. |
No | 0% |
How to calculate the tax
Once you identify your vehicle’s inclusion rate from the table above, you will apply it to a base percentage determined by the vehicle’s engine type.
Petrol & diesel: 22.8% of Cost (per annum) or 47.25% of Tax Book Value (TBV)
Hybrids: 19.6% of Cost (per annum) or 40.5% of TBV
Electric vehicles (EVs): 17% of Cost (per annum) or 35.0% of TBV
(Note: The existing rules for switching between the Cost and Tax Book Value methods remain unchanged.)
Two crucial details
Exemption shake-up: The traditional “work-related vehicle” exemption is being eliminated. However, a total exemption is being introduced for specific emergency vehicles.
The “Incidental Use” safety net: Don’t worry about one-off situations. Infrequent, ad-hoc personal tasks (like an employee borrowing a work ute to move a couch on the weekend) are carved out and will not change the vehicle’s category or trigger extra tax.
What to do now
While these changes don’t kick in until April 2027, they might influence your vehicle purchasing, sign-writing/branding, and employment contract decisions during the next year.
If you want to work out how these changes will affect your specific fleet or business structure, please contact us – we’re here to help you plan ahead.
