Things to think about when looking at bringing in a motor vehicle into your business

Buying Versus Leasing

There are various pros and cons to each option, and much of it comes down to how often you like to change your vehicle, and whether the vehicle you want is within easy reach.

If you choose to buy the vehicle, you can claim depreciation. There are no mileage limits, and once the vehicle is paid off, it is yours to sell or trade in. Ownership has its rewards.

If you choose to lease the vehicle, you may be able to get into a newer vehicle and change it regularly without much fuss. There is usually warranty cover, but keep in mind there are often mileage limits, you will not own the vehicle at the end of the term, and the lease payments keep coming.

Choosing your Fringe Benefit Tax (FBT) calculation method

When it comes to calculating FBT, you have a choice between the Cost Method and the Tax Value Method, and the one you choose can make a real difference over time.

For instance, a $70,000 vehicle (with the tax value having a minimum amount of $8,333) would reach its break-even point in year 5.

If you use the cost method and hold the vehicle for more than five years, you can switch to the tax value method after that point, which in this example would bring you down to $8,333.

If you tend to change your vehicle every couple of years, the cost method is likely your better option. Each time you change vehicles, the clock resets and you start from square one, so the tax value method rarely gets the chance to work in your favour.

One of the best advantages of paying FBT is that you can claim all related expenses — petrol, road user charges, insurance, and servicing. If your business use is relatively low, FBT allows you to capture the full costs without needing to make any adjustments, and you can claim 100% of the GST on the vehicle purchase.

Seeking an alternative?

Not keen on paying FBT? The alternative is to keep a logbook recording your business use over a three-month period, then apply that percentage to your expense claims. The logbook is valid for three years, after which you will need to run another three-month record. Depending on your level of business use, you may not be able to claim 100% of the GST on the vehicle purchase. And without a logbook at all, the maximum business use you can claim is capped at 25%

The other option is to simply claim IRD mileage rates for business travel on a per-kilometre basis. The current rates for the 2025–2026 income year are as follows:

Tier 1 applies where your total kilometres travelled — both business and personal — is under 14,000km. Tier 2 applies where your total kilometres exceed 14,000km.

There is a lot to think about. Most of it depends on your vehicle usage and how often you like to change vehicles.

We can help you figure it out

Stuck weighing your options? Between motor vehicles, low-interest loans, discounted goods and services, and employer contributions to insurance and super schemes, it’s easy to get the calculation wrong or miss an exemption you’re entitled to. Whether you need help working out your FBT obligations, choosing the right calculation method, or simply want someone to handle your quarterly or annual FBT returns so you’re not chasing it yourself, FBT is one of the many tax services we provide and our team can take it off your plate.

Get in touch with our team to make sure you’re only paying what you actually owe.