Proposed FBT Changes 2027 | Company Vehicles

Changes to fringe benefit tax (FBT) could make life easier for businesses providing company vehicles. But the new rules are still proposals, and nothing has changed just yet.

If your business provides vehicles that employees can use privately, you may already be familiar with fringe benefit tax (FBT). It's the tax businesses may need to pay when employees, including shareholder-employees, receive benefits such as the private use of a company vehicle.

The Government has proposed changes to simplify how FBT is calculated on company vehicles, potentially reducing paperwork and making the rules easier to follow.

The changes are intended to take effect from 1 April 2027, but they have not yet been passed into law.

What's being proposed?

Currently, businesses generally need to consider how many days a company vehicle is available for private use when calculating FBT.

Under the proposed changes, vehicles would instead be placed into categories based on how they are used.

Each category would have a set percentage for private use, making it easier to calculate the tax without having to track individual days in the same way.

The proposals also include changes to how vehicles are valued for FBT, with different rates for petrol and diesel vehicles, hybrids and electric vehicles.

What could this mean for your business?

If the changes go ahead, they could affect businesses that provide vehicles to employees or shareholder-employees.

For example:

Trades and contractors: If your employees take work vehicles home or occasionally use them privately, the new rules could change how FBT is calculated.
Farmers and rural businesses: If farm utes or other business vehicles are also used for personal trips, the proposed categories may affect their tax treatment.
Businesses with company cars: If you provide vehicles as part of an employee's remuneration package, the changes could affect your FBT costs.

While the new approach is designed to simplify compliance, it won't necessarily mean every business pays less tax. The impact will depend on the vehicles you provide and how they are used.

Do you need to do anything now?

Not at this stage.

The proposed changes are still working their way through Parliament, so the existing FBT rules continue to apply.

For now, businesses should continue following their current FBT requirements, including maintaining the records needed under the existing rules.

If you're considering purchasing a new company vehicle or changing how employees use business vehicles, it's worth discussing the potential tax implications before making a decision.