FBT on Work Vehicles: What’s New, What’s Gone & What You Can Still Claim
When it comes to business vehicles, navigating Fringe Benefits Tax (FBT) isn’t always simple — but it’s an essential part of building a financially sound and intentional business. With so many moving parts, from emissions standards to employee use, it’s easy to feel unsure of the rules. But when you take the time to understand what’s changing and what still qualifies, FBT becomes more than just a compliance box to tick — it becomes a way to maximise value and support your team with mindfulness at the forefront of your decision-making.
As we move through 2025, there are a few important updates around vehicle-related FBT that every business owner should have on their radar — especially when it comes to electric vehicles.
Before all else, let’s explain what Fringe Benefits Tax is.
FBT is a tax employers pay on certain non-cash benefits they provide to their employees in addition to salary or wages. These benefits might include things like the private use of a work vehicle, low-interest loans, reimbursement of personal expenses, or even perks like gym memberships.
Unlike income tax, which is paid by the employee, FBT is paid by the employer. It’s calculated separately from income tax and has its own rules, rates, and reporting requirements.
The FBT year is different from the usual tax year too, being that it runs from 1 April to 31 March, with returns typically due by 21 May (or 25 June if lodged through a tax agent).
Why does FBT exist?
FBT was introduced to ensure fairness and prevent tax avoidance. Before FBT was established in the mid-1980s, employers could provide generous perks instead of salaries, such as luxury cars or interest-free loans, which gave employees untaxed value while reducing the employer’s taxable income.
FBT was essentially created to level the playing field, ensuring these perks are taxed just like regular wages. It closes a loophole and ensures that all forms of employee compensation are treated consistently in the eyes of the ATO.
Why does FBT matter?
For employers, FBT is more than just another tax, it directly impacts the true cost of offering employee perks and can become a significant business expense if not managed properly.
Understanding how FBT works can allow you to —
Structure remuneration packages more effectively
Avoid surprise tax bills
Claim legitimate exemptions or reductions
Make smarter decisions about what benefits you offer and how
For example, offering a vehicle that’s subject to FBT can be far more costly than offering a vehicle that qualifies for an exemption, like certain electric cars.
Knowing how to navigate FBT can empower you to maximise the value of employee benefits, stay compliant, and reduce your overall tax burden, all without compromising on what you offer your team.
On that note, let’s get into what’s changing in the FBT world this year (2025).
The Australian Taxation Office (ATO) has stated that plug-in hybrid electric vehicles (PHEV) are no longer considered zero- or low-emissions vehicles.
While this change won’t affect your 2025 FBT return, it’s imperative for employers to understand how it applies to the 2026 FBT year, which begins on 1 April 2025.
Which means that, since April 1st, 2025, the window for FBT-exempt PHEVs has closed. That being said, it’s still in play if:
The benefit was already in place before this date
and/or there’s a financially binding commitment to continue private use of the vehicle on or after the 1st of April 2025. This financial binding commitment must also remain in place, unaltered, beyond 1 April 2025.
If a PHEV is due to be delivered to an employee post-1 April 2025, it’s still not exempt, even if there’s a financially binding commitment having been signed earlier, due to the fact that the PHEV would not have been used or available for use by the employee before the 1st of April.
With all this being said, fully electric vehicles are still exempt.
It’s also worth noting that the ATO has finalised Practical Compliance Guideline PCG 2024/2, introducing a simplified method for valuing electricity costs when an electric vehicle is charged at an employee’s home.
Under this guideline, employers can now apply a home charging rate of 4.20 cents per kilometre for eligible EVs — offering a more streamlined approach to calculations.
This method, however, does not extend to plug-in hybrid vehicles (PHEVs), and at this stage, the ATO is not providing an approved valuation method for electricity used in PHEVs.
Recent updates have also simplified what needs to be included in employee declarations.
The make and model of vehicles no longer need to be specified for the following benefit types:
Remote area holiday transport (Sections 60A & 61 of the FBTAA)
Overseas employment holiday transport (Section 61A)
Relocation transport (Section 61B)
Employment interviews or selection tests (Section 61E)
Work-related medical exams, health screenings, preventative care, counselling, or migrant language training (Section 61F)
While EVs can offer tax advantages — particularly with the FBT exemption for eligible zero or low-emission vehicles — there are a few additional considerations employers should be aware of, such as:
Car expenses: Costs like registration, insurance, maintenance, repairs, and fuel (or electricity, for EVs) are exempt from FBT if they relate to a car already provided as a car fringe benefit. This includes electricity used to charge an EV, provided the EV itself is the fringe benefit.
At-home charging equipment: Supplying or reimbursing employees for charging equipment installed at home does not fall under the car expense exemption. Instead, it’s treated as a separate fringe benefit (property, residual, or expense payment) and may be subject to FBT.
Replacement batteries: If a replacement battery substantially upgrades the car’s performance, it’s considered a capital expense — not exempt from FBT. However, if it’s a like-for-like replacement, it’s treated as a standard car expense and remains FBT-exempt.
Workplace charging stations: Charging stations at the employer’s premises can be used FBT-free if the vehicle being charged is provided as a car fringe benefit. However, if employees who don’t have a car fringe benefit use the station, this use may be treated as a separate taxable fringe benefit.
Fringe Benefits Tax can be a heart-led, generous way to support your team beyond just their pay packet — but one uncalculated step could leave you paying far more tax than necessary.
Taking the time to understand the intricacies of each evolving FBT rule is an investment that truly pays off. After all, few things are more powerful than being equipped with the right knowledge.
If you’re looking for guidance as you navigate this ever-changing landscape, we’re here to help. Book a consultation with us and move into this FBT season with clarity and confidence.
