FBT Exempt Vehicles

The rules around exemptions from FBT for motor vehicles are complicated. Exemption depends on the vehicle type and the way it is used. This assessment tool can let you quickly assess any vehicle, with a decision on exemption and a printable report documenting the reasons why.

Provision of a motor vehicle for private use is, in general, a benefit which is taxable under the fringe benefit tax rules. A “motor vehicle” is any motor-powered road vehicle (including a 4 wheel drive vehicle).

Vehicle Type and Design

To be eligible for FBT exemption, a vehicle must meet the basic usage conditions (set out below) and be one of the vehicle types in the List of Vehicles Capable of Being Exempt below.

In general, the vehicle must be:

• a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne, or
• designed to carry a load of one tonne or more, or more than eight passengers, or
• other vehicles: if designed to carry a load of less than 1 tonne, not a vehicle designed for the principal purpose of carrying passengers
• see also: The truth about dual cab utes and FBT

List of Vehicles Capable of Being Exempt

Until 2017, the ATO maintained lists of vehicles brands and models indicating which were considered eligible and ineligible for FBT exemption.

Those lists have since been replaced with a list of guidelines for eligible vehicle types and their usage.

Is Your Employee’s Vehicle Use Exempt from FBT?

Providing a vehicle to an employee is one of the most frequently mishandled benefits for FBT purposes.

Whether a car benefit is exempt depends the type of vehicle, how it is used, and in some cases who provides it.

Two Exemption Frameworks

There are two distinct FBT frameworks for exempt vehicles, depending entirely on the vehicle type.

Framework A: Eligible Vehicles with Limited Private Use

Subsections 8(2) and 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) exempt private use of certain eligible vehicles where that private use is limited to work-related travel and any non-work use that is minor, infrequent and irregular.

This may be referred to as the “eligible commercial vehicle” exemption. It covers utes, vans, taxis, certain 4WDs and other non-passenger vehicles.

This exemption does not remove FBT on unlimited private use. It operates as a conditional carve-out that ceases to apply if the employee uses the vehicle substantially for personal purposes.

Framework B: Electric Car Exemption

Section 8A of the FBTAA, provides a separate exemption for eligible electric cars. There is no requirement for private use to be limited. The exemption is unconditional as to use, subject to four cumulative eligibility conditions being satisfied.

What Is an Eligible Vehicle?

The first question under Framework A is whether the vehicle qualifies as an eligible vehicle at all. The FBTAA distinguishes between “cars” (which carry fewer than 9 passengers and a load of less than one tonne) and other road vehicles.

The categories below reflect both the statutory definitions and how the ATO applies them in practice.

Single Cab Utes

A single cab ute is a utility truck within the meaning of subsection 8(2). The courts have confirmed that utility trucks are derivatives of motor cars (Case M10, 80 ATC 76), and single cab utes fall squarely within this category.

Thus they are eligible vehicles regardless of load capacity. Proceed to the private use test.

Dual Cab Utes (Crew Cabs)

Dual cabs are not utility trucks (MT 2024, para 7). They are variants of conventional goods vehicles with additional rear seating, and cannot rely on the utility truck limb of s8(2). They must instead satisfy one of two tests.

Most current standard “dual cab” utes (like the HiLux, Ranger, or D-MAX) have a maximum seating capacity of 5, so the “>8 passengers” test is not applicable. The relevant tests are the load capacity test and the passenger purpose test.

The Tax Office has recently focussed some attention on dual cab vehicles, because a number of models have a load capacity of less than 1 tonne. Being designed to carry crew, the less-than-one-tonne, principal purpose test may exclude the vehicle from exemption.

• ATO Crack Down on Dual Cab Utes – BDO Australia
• The truth about dual cab utes and FBT – ATO

Test 1: Load Capacity of 1 Tonne or More (s47(6))

A dual cab designed to carry a load of one tonne or more is not classified as a “car” under the FBTAA definition, and is therefore eligible under s47(6).

The load capacity is calculated as:

FORMULA: Gross Vehicle Weight (GVW, from the compliance plate) MINUS Basic Kerb Weight (unladen weight) = Designed Load Capacity

For cab/chassis vehicles, the body weight must also be deducted before the test is applied (MT 2024, para 12). The GVW is found on the compliance plate in the engine bay, door pillar or footwell.

Test 2: Not Principally for Passengers (s8(2))

A dual cab with a load capacity of less than one tonne may still be eligible if it is not designed for the principal purpose of carrying passengers (MT 2024, paras 14-16).

The test applies the Australian Design Rules formula.

Panel Vans and Goods Vans

Panel vans and goods vans are explicitly listed as eligible vehicles under s8(2) as vehicles not designed for the principal purpose of carrying passengers. Load capacity is not determinative; even a van under one tonne qualifies.

RESULT: Panel vans and goods vans are eligible vehicles. Proceed to the private use test.

Taxis

Taxis are explicitly named as eligible vehicles under s8(2), subject to limited private use.

4-Wheel Drive Vehicles

A 4WD is an eligible vehicle if it satisfies at least one of three conditions:

• Designed to carry a load of 1 tonne or more (same GVW minus kerb weight formula)
• Designed to carry more than 8 passengers including the driver
• Has a principal purpose other than carrying passengers, as indicated by its appearance, marketing specification or carrying capacity (see TD 94/19)

The third limb is the most commonly relied upon for standard 4WDs. TD 94/19 sets out the ATO’s approach and lists indicators including prominent bull bars, tray backs, and being marketed primarily as a work or off-road vehicle rather than a people mover.

Modified Vehicles

A car that has been permanently modified, such as a hearse, is an eligible vehicle if the modification permanently affects the inherent design of the vehicle for the entire FBT year during which the car is used by the employee. See MT 2033 for the ATO’s approach to determining what constitutes a qualifying modification.

Other Road Vehicles

Any other road vehicle (not a car) designed to carry a load of one tonne or more, or more than 8 passengers including the driver, is an eligible vehicle under s47(6). This category captures trucks, larger commercial vehicles, and similar.

Passenger Cars and SUVs

Standard passenger cars (sedans, wagons, hatchbacks, people movers, and most SUVs) are not eligible vehicles under Framework A.

FBT applies to any private use, and the taxable value must be calculated using the statutory formula method or the operating cost method.

EXCEPTION: If the vehicle is an electric or plug-in hybrid passenger car, Framework B (the electric car exemption) may apply instead. See Part 3.

Part 3: The Electric Car Exemption (s8A)

From 1 July 2022, a separate FBT exemption applies to eligible electric cars provided to employees.

This exemption is not subject to any restriction on private use.

Four cumulative conditions must all be satisfied.

Condition 1: Zero or Low Emissions Vehicle

The vehicle must be one of the following types:

• Battery electric vehicle (BEV)
• Hydrogen fuel cell electric vehicle
• Plug-in hybrid electric vehicle (PHEV), subject to the date restriction below

Standard hybrids that cannot be plugged in and are charged only by the petrol engine are excluded. Electric motorcycles and scooters are also excluded because they are not “cars” for FBT purposes.

PHEV Special Rule: 1 April 2025

From 1 April 2025, PHEVs are no longer zero or low emissions vehicles under the FBTAA. New PHEV arrangements entered into on or after this date do not qualify.

A PHEV can still be exempt for the 2025-26 and later FBT years only if both of the following apply:

• The PHEV was used or made available (and was exempt) before 1 April 2025
• There is a financially binding commitment, not merely optional, to continue providing the vehicle on and after 1 April 2025 (PCG 2024/2, fn 19)

Condition 2: Designed as a “Car”

The electric car exemption is limited to vehicles classified as “cars” for FBT purposes: vehicles designed to carry a load of less than one tonne and fewer than 9 passengers.

An electric ute or electric van designed to carry one tonne or more is not a “car” and cannot access the s8A exemption. It may qualify under Framework A as an eligible vehicle.

Condition 3: First Held and Used on or After 1 July 2022

The car must have been first both held and used on or after 1 July 2022. This test looks at the car’s entire history, not just the current employer’s ownership.

• Held – The car is owned, leased, or otherwise made available by any entity
• Used – The car is used or available for use by any entity or person
• Test fails if – Either condition was first satisfied before 1 July 2022, by any prior owner

Condition 4: LCT Has Never Been Payable

Luxury car tax (LCT) must never have been payable on the importation or sale of the car, at any time, by any party in the chain of ownership.

The relevant threshold is the fuel-efficient vehicle LCT threshold (which is higher than the standard LCT threshold). If the car’s GST-inclusive sale price exceeded this threshold at any prior sale, including the original retail sale by the dealer, LCT was payable and the exemption is permanently lost. This applies even if the car is now valued below the threshold.

When purchasing a second-hand electric car, employers should check all available ownership and sales documentation before assuming the exemption applies.

What the Electric Car Exemption Covers

Where the exemption applies, FBT is not payable on:

• The employee’s private use of the car
• Associated car expenses: registration, insurance, repairs, maintenance, fuel (including electricity)

Note that a home charging station installed at the employee’s premises is not an associated car expense. It is a separate property fringe benefit or expense payment fringe benefit and may attract FBT in its own right.

Reportable Fringe Benefits: Still Required

Although the benefit is exempt from FBT, it is still a reportable fringe benefit. Employers must calculate the notional taxable value of the private use and report it on the employee’s income statement if the grossed-up value exceeds $2,000. This can affect the employee’s eligibility for certain means-tested government benefits and tax offsets.

Home Charging Electricity Costs (PCG 2024/2)

Calculating the electricity cost of home charging is difficult because EV charging is combined with the household’s total electricity use. PCG 2024/2 provides two methods:

• EV home charging rate – 4.20 cents per kilometre x total km travelled in the FBT year. Available for battery electric vehicles and hydrogen FCEVs.
• PHEV methodology – A 7-step method that separates petrol kilometres from electricity kilometres using the vehicle’s Condition B petrol consumption rate and actual petrol purchases. Applies to PHEVs still within the exemption.
• Actual cost method – Available to both EVs and PHEVs where actual electricity costs can be accurately determined.

Part 4: The Private Use Test (Framework A Vehicles)

Once a vehicle qualifies as an eligible vehicle under Framework A, the exemption only applies if the employee’s private use is limited. The statutory test requires that private use be confined to:

• Travel between the employee’s home and their place of work (“work-related travel” under s136(1))
• Travel incidental to travel in the course of performing employment duties
• Non-work-related use that is minor, infrequent and irregular (e.g. occasional use to remove domestic rubbish)

Regular or substantial private use (weekends, holidays, personal errands) takes the vehicle outside the exemption entirely. FBT then applies to the private use component.

Part 5: The PCG 2018/3 Safe Harbour

PCG 2018/3 is an ATO Practical Compliance Guideline that provides a “safe harbour.”

This means that if an employer meets all its conditions, the ATO will not devote compliance resources to reviewing whether private use was genuinely minor, infrequent and irregular. The employer does not need to keep detailed usage records.

The safe harbour applies to the 2019 FBT year onwards.

Base Eligibility Conditions

To rely on PCG 2018/3, the following must all apply:

• Eligible vehicle – The vehicle must be an eligible vehicle (as described in Part 2)
• Business use – The vehicle is provided to the employee for business use to perform their work duties
• Below LCT threshold – The vehicle had a GST-inclusive value below the luxury car tax threshold at the time it was acquired
• Not salary packaging – The vehicle is not provided as part of a salary packaging arrangement, and the employee cannot elect to receive cash instead
• Policy in place – The employer has a written policy limiting private use, and has obtained assurance from the employee that their use is within the limits

Kilometre Limits

In addition to the base conditions, PCG 2018/3 requires that the employee’s actual use falls within specific quantitative limits:

• Diversions on home-work trips – Any diversion adds no more than 2 km to the ordinary length of the home-to-work or work-to-home trip
• Total private travel – Journeys undertaken wholly for a private purpose (other than home-to-work travel) do not exceed 1,000 km in total for the FBT year
• Single return trip – No single return private journey exceeds 200 km

Note that travel from work to a separate destination (e.g. sport training after work) is not a “diversion” from the home-to-work trip. It is its own private journey and counts toward the 1,000 km annual limit.

What the Safe Harbour Provides

If all conditions are met:

• The employer does not need to keep records demonstrating private use was minor, infrequent and irregular
• The ATO will not apply compliance resources to review whether the car-related exemptions apply for that employee
• The employer must obtain written or email confirmation from the employee each FBT year confirming the limits were met

PCG 2018/3 does not change the law. Employers who cannot meet the safe harbour conditions can still access the exemption by demonstrating through other evidence (e.g. logbooks, GPS records, odometer comparisons) that private use was genuinely minor, infrequent and irregular.

Part 6: Three Additional Exemptions

Three further exemptions operate independently of the vehicle type and private use tests above. They apply in specific factual circumstances.

Exemption 1: Unregistered Vehicles

Source: FBT Guide for Employers, Chapter 20.

Any private use of a car is exempt from FBT if:

• Full year unregistered – The car is unregistered for the entire FBT year, not just part of it
• Cannot be lawfully driven – The car cannot lawfully be driven on a public road. A car that may lawfully be driven on a public road is treated as registered, regardless of whether it has actually been registered
• Principally business use – The car is used wholly or principally (i.e. more than 50%) for the employer’s business operations

This exemption applies to any car type, including standard passenger cars. It is not limited to eligible vehicles. The vehicle does not need to be a ute, van or 4WD.

Exemption 2: Emergency Service Cars

Source: ATO guidance, How FBT applies to cars.

FBT does not apply to an employee home garaging a car where all of the following conditions are satisfied:

• Service type – The car is used by an ambulance, police or fire fighting service
• Exterior markings – The car is fitted with exterior markings indicating it is an emergency service car
• Equipment – The car is equipped with a flashing warning light and a horn, bell or alarm

Note that all three conditions are required. A single condition is not sufficient. Interior markings or a light alone will not satisfy the test. This exemption applies specifically to home garaging; other private use of the car may still attract FBT.

Exemption 3: Personal Services Entity, Non-Deductible Cars

Source: FBT Guide for Employers, Chapter 20; section 86-60 ITAA 1997.

A car benefit is exempt from FBT where the person providing the benefit cannot deduct an amount under the ITAA 1997 because of section 86-60.

Section 86-60 applies to personal services entities (PSEs): companies, partnerships or trusts that derive personal services income attributable to one individual. The section limits a PSE’s deductible car expenses to those for one car for the private use of the relevant individual. Additional cars receive no deduction.

The FBT exemption arises precisely because the PSE is not entitled to an income tax deduction for the car. The tax disadvantage on one side (denied deduction) produces the FBT exemption on the other.

This exemption applies only to the additional cars beyond the permitted one. The one car for which the deduction is available does not attract this exemption (though it may still qualify under another exemption path).

Part 7: When FBT Applies, Next Steps

Where no exemption applies, or where the conditions of an exemption are not satisfied, FBT applies to the private use component of the car benefit. Employers must then:

• Determine the taxable value of the car fringe benefit using either the statutory formula method or the operating cost method
• Lodge an FBT return and pay FBT at the current rate (47% on the grossed-up taxable value)
• Consider whether associated expenses (fuel, insurance, repairs) also give rise to separate fringe benefits
• Review whether the arrangement can be restructured for future FBT years to satisfy an exemption

Common Pitfalls

• Assuming dual cab utes are automatically exempt – Dual cabs must satisfy either the 1-tonne load test or the passenger purpose test. Many smaller dual cab models fail both.
• Ignoring the full-year requirement for PCG 2018/3 – The safe harbour applies for an entire FBT year. Conditions must be re-checked annually; changes to salary arrangements, vehicle use or the vehicle itself can affect eligibility.
• Assuming a second-hand EV qualifies – The LCT history of the vehicle must be verified from the original retail sale. If LCT was ever payable, by anyone in the ownership chain, the electric car exemption is permanently unavailable.
• Not reporting the reportable fringe benefit – Even where the electric car exemption applies, the notional taxable value must be calculated and reported if it exceeds the $2,000 grossed-up threshold.
• Treating PHEVs as EV-exempt after 1 April 2025 – New PHEV arrangements after this date do not qualify. Existing arrangements require a binding commitment to continue.

Quick Reference: Exemption Paths at a Glance

Vehicle Type	Eligible Vehicle?	Private Use Limit?	Key Test / Source
Single cab ute	Yes (s8(2))	Yes, work-related + minor private	Utility truck, no further test
Dual cab ≥ 1t load	Yes (s47(6))	Yes, work-related + minor private	GVW minus kerb weight ≥ 1,000 kg
Dual cab < 1t, not pax purpose	Yes (s8(2))	Yes, work-related + minor private	MT 2024 seats x 68 kg formula
Dual cab < 1t, pax purpose	No	N/A	FBT applies as car fringe benefit
Panel / goods van	Yes (s8(2))	Yes, work-related + minor private	No load test required
Taxi	Yes (s8(2))	Yes, work-related + minor private	Explicitly listed
4WD, non-passenger purpose	Yes	Yes, work-related + minor private	See TD 94/19
Modified car	Yes (s8(2))	Yes, work-related + minor private	Permanent modification, full year
BEV / hydrogen FCEV	Yes (s8A)	No limit on private use	All 4 s8A conditions must be met
PHEV (pre-1 Apr 2025, binding)	Yes (s8A)	No limit on private use	Binding commitment required
PHEV (new, post-1 Apr 2025)	No	N/A	Exemption removed from 1 Apr 2025
Passenger car / SUV	No	N/A	FBT applies as car fringe benefit
Unregistered vehicle (business)	Any type	No limit	Ch 20 FBT Guide, all 3 conditions
Emergency service car	Any type	Home garaging exempt	All 3 conditions required
PSE non-deductible car	Any type	Any use	s86-60 ITAA 1997 denial of deduction

Sources and References

• Fringe Benefits Tax Assessment Act 1986, ss 8(2), 8A, 47(6), 136(1)
• Income Tax Assessment Act 1997, s 86-60
• MT 2024: Fringe benefits tax, dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel
• PCG 2018/3: Exempt car benefits and exempt residual benefits: compliance approach to determining private use of vehicles
• PCG 2024/2: Electric vehicle home charging rate, calculating electricity costs when a vehicle is charged at an employee’s or individual’s home
• ATO: Exempt use of eligible vehicles (ato.gov.au)
• ATO: Electric cars exemption (ato.gov.au)
• ATO: How FBT applies to cars (ato.gov.au)
• ATO: Fringe Benefits Tax, A Guide for Employers, Chapter 20
• TD 94/19: Fringe benefits tax, 4-wheel drive vehicles
• Case M10, 80 ATC 76 (utility truck definition)

See also:

• FBT myth surrounding FBT ‘exempt’ cars – RSM Australia
• FBT and exempt vehicles – Tax Rambling
• ATO practical compliance guideline – Private use of exempt car and residual benefits – PWC

This information is general guidance only and is not legal or tax advice. Consult a registered tax adviser for advice specific to your circumstances.

This page was last modified 2026-05-05