Buying a Company Car: What Tax Benefits Can You Get?

If you’re running a business or working as a contractor, you’ve probably thought about getting a company car.

It sounds simple — buy a car, use it for work, and save on tax.

But in reality, there are rules around what you can claim, how much you can claim, and whether extra taxes apply.

Let’s go through it step by step.

What Is a Company Car?

A company car is a vehicle that is:

• Owned or leased by a business

• Used for work-related purposes

• Sometimes also used for personal use

This last part matters — because it affects how your tax is calculated.

What Can You Claim?

If the car is used for business, you can claim several expenses, including:

• Fuel and running costs

• Repairs and maintenance

• Insurance and registration

• Lease payments (if leased)

• Depreciation (if owned)

But here’s the key point:

You can only claim the business-use portion.

Business Use vs Personal Use

Let’s say you use your car:

• 70% for work

• 30% for personal use

You can only claim 70% of your expenses.

To prove this, you usually need a logbook.

Logbook Method (Most Common)

The logbook method is widely used because it gives accurate results.

Here’s how it works:

• You record your trips for at least 12 weeks

• You calculate your work-use percentage

• You apply that percentage to your total car expenses

Once done, the logbook can be valid for up to 5 years (if usage stays similar).

Instant Asset Write-Off (Important for Businesses)

If you’re a small business, you may be able to claim the cost of the car under the instant asset write-off rules.

This allows you to:

• Deduct part or all of the vehicle cost

• Claim it in the same financial year

However, limits apply, and they change from time to time.

2026 Update: What to Watch

Tax rules around vehicle deductions continue to evolve.

As of 2026:

• The government is reviewing small business deduction thresholds

• Electric vehicles (EVs) are receiving more tax incentives

• Fringe Benefits Tax (FBT) exemptions may apply to certain EVs

This means choosing the right vehicle could impact your tax more than before.

What About Fringe Benefits Tax (FBT)?

This is where many people get confused.

If your company car is used for personal purposes, FBT may apply.

In simple terms:

• If the car benefits you personally → extra tax may be charged

• If it’s strictly for business → FBT may not apply

There are ways to reduce or manage FBT, but it needs to be planned properly.

Electric Vehicles (EVs) and Tax Benefits

EVs are becoming popular for tax reasons.

In some cases:

• Eligible EVs may be exempt from FBT

• Running costs are lower

• Additional incentives may apply

This makes them a strong option for business owners.

A Registered Tax Agent’s Tip

We often see clients buy a car thinking it will “fully reduce tax.”

That’s not always true.

The benefit depends on:

• How much you use it for work

• How it’s structured (personal vs company ownership)

• Whether FBT applies

Before buying, it’s worth planning it properly.

Common Mistakes to Avoid

• Claiming 100% business use without records

• Ignoring FBT rules

• Not keeping a logbook

• Buying a car just for tax reasons without real need

These can lead to audits or denied claims

Should You Buy a Company Car?

It depends on your situation.

A company car can be tax-effective if:

• You use it heavily for work

• You keep proper records

• You structure it correctly

Otherwise, the benefits may be smaller than expected.

Need Help Structuring It Properly?

If you’re unsure, it’s better to get advice before making the purchase.

You can explore our Business Tax Services or speak with us directly to plan it the right way.

FAQs

Can I claim a company car on tax?

Yes, but only the business-use portion of expenses is deductible.

Do I need a logbook?

Yes, if you want to claim accurate business usage using the logbook method.

What is FBT on a company car?

Fringe Benefits Tax applies when the car is used for personal purposes.

Are electric cars tax-free?

Not fully, but some EVs may qualify for FBT exemptions and incentives.