What Is a Company Car?

How to utilise company cars in a small business

Company cars may be available for use by any employee who needs to travel for work purposes, such as visiting a client site or going to a conference, or they may be set aside for the exclusive use of a particular employee for both business and personal usage.

Only the business component of company car usage may be claimed as a tax deduction, which is why it is very important to maintain a log book to track any personal usage, which also attracts Fringe Benefits Tax (FBT).

FBT is taxed at a high rate (47%), so a company car designated for a particular employee’s personal as well as business usage is a considerable expense to the business.

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Making use of deductions for company cars

Any business-related running costs incurred with owning and using company cars may be claimed as a tax deduction. These include expenses such as insurance, registration, fuel and maintenance as well as depreciation.

There is a cap on the maximum amount that can be claimed on the purchase price and depreciation of company cars, called the car limit. You can read more about the car limit from the ATO.

Company vehicles reimbursements

The ATO requires detailed records to be kept to be able to identify business and personal usage of company cars as on the business portion of a company vehicle’s usage may be claimed as a tax deduction. While it is commonly believed that you do not need to maintain a log book for commercial vehicles, this is not the case, and you will need to be able to provide it if requested by the ATO to validate business usage.

Driversnote for Teams is a simple and effective way for employees to use their mobile phones to keep track of their trips automatically. Managers can then review and approve or reject these for reimbursement or as business-related usage.

FAQ

Who pays FBT on company cars?

FBT is paid by the employer, so the FBT on company vehicles is paid by the company and is taxed at the rate of 47% on personal usage. While not assessable for the employee, if the amount of the benefit exceeds $2,000, the employee will need to include Reportable Fringe Benefits in their tax return which it is used to calculate items such as the Medicare Levy.

How many company cars can you have?

There is no limit defined by the ATO on the number of company cars that you can have, however, the amount that can be claimed for each vehicle is capped by the car limit which was $64,741 for the 2022/23 financial year, and is $68,108 for the 2023/24 financial year. You also will need to keep track of the usage and expenses associated with each vehicle separately to claim the business component as a tax deduction.