Not every employer-provided vehicle attracts Fringe Benefits Tax. Some vehicle types are exempt from FBT entirely, and since 2022, a significant exemption has applied to eligible electric cars. Knowing which vehicles qualify — and what conditions you need to meet — can remove a meaningful tax cost from your salary packaging arrangement or fleet.
What vehicles are exempt from FBT?
Several categories of vehicle fall outside the FBT car benefit rules entirely. These are not “cars” under the FBT Act definition, so standard FBT car benefit calculations do not apply.
Utes and vans with a payload of one tonne or more are not cars for FBT purposes. If the primary purpose of the vehicle is carrying goods or materials, and it meets the payload threshold, it sits outside the car fringe benefit rules. This is why many tradespeople and contractors use utes — they avoid the FBT calculation entirely, provided the vehicle is not primarily used for private travel.
Minibuses designed to carry nine or more passengers are also not cars under FBT rules and are treated under a different framework.
Motorcycles are not subject to car FBT rules either, though they may still attract other fringe benefit considerations.
For vehicles that are cars under the ATO definition — those designed to carry fewer than nine passengers, or goods vehicles under the one-tonne threshold — a separate, more significant exemption applies to eligible electric and low-emission vehicles.
The electric vehicle FBT exemption (2022+)
From 1 July 2022, eligible battery electric vehicles (BEVs) and hydrogen fuel cell electric vehicles provided by an employer are exempt from FBT. This exemption was introduced to encourage the take-up of zero-emission vehicles and applies regardless of whether the statutory formula or operating cost method would otherwise apply.
The exemption covers the entire taxable value of the car fringe benefit — meaning an eligible electric vehicle in a salary package attracts no FBT at all, as long as conditions are met.
This is a major financial benefit. For a car with a taxable value of $15,000, the FBT saving at the 47% FBT rate is substantial. Combined with the ability to salary sacrifice the vehicle pre-tax, the EV FBT exemption makes salary packaging an electric car genuinely attractive.
Eligible vehicles for the EV FBT exemption
To qualify for the exemption, the vehicle must be:
- a battery electric vehicle (BEV) or hydrogen fuel cell electric vehicle (HFCEV)
- a car under the FBT Act (designed to carry fewer than nine passengers, or a goods vehicle under one tonne)
- first held and used on or after 1 July 2022 — vehicles first used before this date do not qualify
The vehicle must also be valued below the luxury car tax threshold at the time it was first sold (not the salary package start date). For 2025–26, the luxury car tax threshold for fuel-efficient vehicles is $91,387. Vehicles above this threshold do not qualify for the FBT exemption.
Conditions for the FBT exemption
Claiming the exemption is not automatic — it requires that the car is used and the exemption conditions are monitored throughout the FBT year.
The car must be provided as a fringe benefit. It must be made available to the employee for private use. An employee simply reimbursed for the purchase does not qualify.
The employer must hold records confirming the car’s first use date, its cost, and that it meets the eligibility requirements. The ATO can request this documentation.
The exemption applies per car, per FBT year. If the vehicle changes hands or is replaced, the replacement vehicle must independently meet all conditions.
One condition worth noting: even though the car is exempt from FBT, the value of the benefit still appears as a reportable fringe benefit amount on the employee’s payment summary if it exceeds $2,000. This affects income-tested calculations such as the Medicare levy surcharge, private health insurance rebate, and HECS-HELP repayments — even though no FBT is payable.
Plug-in hybrid vehicles and FBT
The treatment of plug-in hybrid electric vehicles (PHEVs) changed from 1 April 2025. Before this date, PHEVs were also exempt from FBT under the same rules as BEVs.
From 1 April 2025, PHEVs no longer qualify for the FBT exemption — unless the vehicle was already held under a financially binding commitment entered into before 1 April 2025. If you entered a novated lease or employer arrangement for a PHEV before that date, the exemption may continue to apply for the duration of that arrangement.
New PHEV arrangements entered on or after 1 April 2025 are subject to normal FBT rules. This is a significant change for employees considering salary packaging a plug-in hybrid.
How to document FBT-exempt use
Even though eligible EVs are exempt from FBT, good record-keeping matters for several reasons:
- The ATO may audit whether the vehicle actually qualifies.
- The luxury car tax threshold check requires evidence of the original purchase price.
- The reportable fringe benefit amount calculation still requires the notional taxable value to be determined.
- If circumstances change — for example, the vehicle is replaced, or the employee’s salary package is restructured — records ensure you can demonstrate entitlement to the exemption.
For the reportable fringe benefit calculation, employers typically use the statutory formula to determine the notional taxable value, even though no FBT is payable. This requires knowing the base value of the car and the number of days it was available.
Tripbook’s kilometre tracking can support FBT-exempt arrangements by maintaining a record of business and private use throughout the year. Even for exempt vehicles, having clean records of odometer readings and trip purposes keeps your documentation complete. For how this fits into the broader FBT picture, see FBT car benefits Australia.
If you are documenting work-related travel in a vehicle that also has FBT implications, see ATO logbook requirements for the full picture on what a valid logbook must include.
FBT exempt vehicles — particularly battery electric cars — represent a genuine planning opportunity for both employers and employees. Understanding eligibility conditions and keeping appropriate records protects the exemption if it is ever queried.
Download Tripbook to track kilometres in your FBT-exempt or salary-packaged vehicle with records that hold up to scrutiny.
