Is buying a car in the company name worth it?

I was asked recently what the most common question I receive as a business accountant is. The answer was simple: “Should I buy a new car through my company?” While many clients feel it’s a smart tax minimisation strategy, the reality is much more nuanced. Buying a vehicle through the company depends heavily on how the vehicle is used, your business structure, and your willingness to manage compliance requirements.

Purchasing a vehicle through your company is beneficial if the car is primarily used for business purposes. In these cases, the company may be able to claim:

• Depreciation (or temporary full expensing where applicable)
• GST credits on purchase and running costs
• Deductions for expenses such as fuel, servicing, insurance, and registration

If your vehicle use is high for business, generally 75% or more, and is well documented through a logbook, the tax advantages can be meaningful.

Before doing so, it is important to know that the Australian Taxation Office (ATO) places significant emphasis on substantiation. To claim business use:

• You must maintain a valid logbook for at least 12 weeks
• The logbook determines your business vs private use percentage
• This percentage is then applied to claim deductions or calculate Fringe Benefits Tax (FBT)

If you cannot demonstrate high business use, the benefits of company ownership diminish quickly. The biggest drawback is the Fringe Benefits Tax (FBT). If a company-owned vehicle is used for private purposes, FBT will likely apply.

• FBT is currently charged at 47% on the grossed-up taxable value of the benefit. This can become expensive very quickly.
• If you don’t keep a logbook, the ATO applies the statutory formula method, which assumes 20% of the car’s cost base (including GST and on-road costs) is subject to FBT annually. This applies regardless of how much the car is actually used privately.

Alternatively, the employee or owner can reimburse the company for private use, which may reduce or eliminate FBT, but this reimbursement becomes assessable income to the business, creating another layer of tax complexity.

For many SME owners, particularly contractors, consultants, or those working from home, the vehicle is primarily used for private purposes. In these situations:

• Business use is typically low
• FBT exposure is high
• Compliance requirements increase
• Costs such as insurance and registration are often higher in a company

As a result, buying the vehicle in the company name can work out more expensive and complex than owning it personally. If you purchase the vehicle in your own name:

• You can still claim work-related travel deductions using a logbook method
• There is no FBT exposure
• Administration is significantly simpler

In many cases, this approach delivers a similar tax outcome without the compliance burden.

There is one important exception to the FBT rules: eligible electric vehicles. Under current legislation:

• FBT is exempt for eligible zero or low-emission vehicles
• The exemption applies to vehicles first held and used from 1 July 2022
• The car must be below the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles, currently $91,387 for 2024–25, indexed annually

The exemption applies to battery-electric and hydrogen fuel-cell vehicles. This exemption can make company ownership attractive for EVs, particularly where there is some private use. However, the government has flagged a mid-2027 review of the EV FBT exemption, meaning the long-term availability of this benefit is uncertain.

Before deciding, SME owners should also consider:

• Cash flow impact. Purchasing through the company ties up business capital
• Financing structures. Loans vs leases may have different tax outcomes
• Exit strategy. Transferring the car out of the company later can trigger tax consequences
• Record-keeping obligations. Logbooks, FBT returns, and ongoing compliance

There is no one-size-fits-all answer. The decision should be based on your actual usage, business structure, and long-term strategy, not just perceived tax benefits.

• Yes, if the vehicle is genuinely used mostly for business, and you are prepared to manage FBT and compliance
• No, if the vehicle is primarily for private use, as it will likely cost more overall

For many SME owners, particularly those who do not travel extensively for work, personal ownership with a logbook often delivers a cleaner, more cost-effective outcome.

Before making a purchase, it’s worth getting tailored advice to ensure the structure supports tax efficiency and simplicity, not undermines them.