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Motor vehicles used by your employees

How to claim expenses when your employees use a vehicle as part of running the business.

Last updated 19 June 2024

Employee uses own vehicle

If your employee uses their own vehicle as part of the everyday running of your business, your business can claim a deduction for any motor vehicle allowances or reimbursements you pay them for their costs, such as the cost of fuel.

Employee uses business vehicle

If you operate your business as a company or trust and your employee or their associate (such as a spouse) uses a business vehicle for private purposes, then:

  • you may be asked to show how the expenses were connected to the business
  • your business may have to pay fringe benefits tax (FBT)
  • the FBT you pay is tax deductible
  • the private portion of the expenses that are subject to FBT are tax deductible.

Example: Motor vehicle expenses related to employment

Habib has a small accountant consultancy business he runs through his company, Beetle Pty Ltd. Habib is the sole director and worker in his business.

Beetle has entered into a four-year lease for a four wheel drive vehicle with a carrying capacity of less than one tonne. Habib uses the vehicle for both business and private purposes.

As the motor vehicle was provided to Habib to use for business and private activities, Beetle is entitled to claim a deduction for all of the lease payments and other expenses incurred.

However, Beetle may have to pay FBT for the percentage of the vehicle use that was for private purposes. Any FBT that Beetle pays is tax deductible.

End of example


Example: Fringe benefits tax implications when employee uses business vehicle and garages it at home

Prime Plumbing is a plumbing business set up as a company and they provide their two employees with business vehicles to use as part of the job. There is no space at Prime Plumbing's business premises where the vehicles can be safely garaged overnight, so the two employees drive the vehicles to and from their homes and garage the vehicles at their homes each night.

As the vehicles are garaged at each employee's home, they are taken to be available for the employee's private use.

This arrangement means that Prime Plumbing is providing a fringe benefit. However, if the vehicles are utes that carry less than one tonne and their private use is limited to travelling between work and home as well as minor, infrequent and irregular private use, then the use of the vehicle exempt from FBT.

End of example

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