CAN MY LTC BUY ME A COMPANY CAR? WILL I HAVE TO PAY FBT?

Can my LTC buy me a company car? Yes, it can. Will you have to pay Fringe Benefit Tax(opens in new tab) (FBT)? That depends on your situation. This guide walks through when FBT applies, and why most LTC owners don’t actually pay it. Then we work through a full example showing how the numbers play out instead.

Updated 15 September 2026: This article was first published in May 2026. The Government has since introduced the actual legislation — the Taxation (Annual Rates for 2026–27, FBT Simplification, Foreign Investment Funds, and Remedial Measures) Bill, on 10 September 2026 — confirming the motor vehicle FBT reform referenced below, which was still just a Budget proposal when this article was first written. We’ve updated the relevant section to reflect the Bill as introduced, including a new option for small companies with two or fewer vehicles.

30-Second Read

• FBT only applies if the car is supplied to an employee. Most LTCs that own rental property don’t have employees at all.
• A “working owner” isn’t treated as an employee for FBT purposes. That’s someone with a look-through interest but no formal employment contract.
• No FBT doesn’t mean no tax cost, though. The private-use portion of the car’s costs becomes non-deductible. It also gets treated as a deemed distribution of profit to the owner using the car.
• A major overhaul of how motor vehicle FBT gets calculated for employees will take effect from 1 April 2027 — worth knowing about if your LTC has genuine employees.
• If your company isn’t an LTC, the rules work differently. See our articles on company cars generally and the upcoming FBT changes.

Is the Car Being Supplied to an Employee?

FBT applies to an LTC only if the car is supplied to an employee. Most LTCs that own rental property don’t have employees in the first place. They’re typically just the owners managing their own investment, with no staff on the books at all.

What Counts as an “Employee”?

An employee is someone employed by the company under an actual employment contract, the same as any other job. A “working owner”, though, isn’t treated as an employee for FBT purposes. That comes from the Taxation (Annual Rates, Returns Filing and Remedial Matters) Act 2012, which specifically carved working owners out of the standard employee definition.

So If I’m a Working Owner, the LTC Can Buy Me a Car With No FBT?

Yes — if you’re a look-through owner rather than an employee, there’s no FBT liability on the car. That’s not quite the end of the story, though. The cost of providing that benefit still gets treated as a distribution of profit to you. That applies to the extent of your private use. The private-use portion of the running costs becomes non-deductible for the other owners in the LTC. In other words, you avoid FBT. But the private-use cost doesn’t just disappear — it shows up elsewhere, in how the LTC’s profit gets allocated.

Worked Example

John and Mary each hold a 50% shareholding in an LTC that owns a rental investment property. The LTC buys John a car for $10,000. John isn’t an employee of the LTC. The car is available to him for private use 90% of the time.

Depreciation. The LTC depreciates the car as a capital asset, but has to adjust for John’s 90% private use. That adjustment drastically reduces how much depreciation the LTC can actually claim.

Running costs. The car costs $4,000 a year to run. Since 90% of that use is private, the LTC can only claim the remaining 10% as a tax-deductible expense — just $400. The other $3,600 is non-deductible.

Working out the tax position. Say the LTC has taxable income of $40,000, and total expenses of $24,000, including the car costs. Take out the $3,600 non-deductible portion of the car costs, and claimable expenses come to $20,400. That leaves a net profit of $19,600 for the LTC.

Split evenly between the two 50% owners, that’s $9,800 each. But John also picks up an extra $3,600 — his share of the private-use benefit, treated as a deemed distribution to him alone. That brings John’s total taxable income from the LTC to $13,400, while Mary’s stays at $9,800.

Changes Coming From 1 April 2027

The Taxation (Annual Rates for 2026–27, FBT Simplification, Foreign Investment Funds, and Remedial Measures) Bill — introduced to Parliament on 10 September 2026 — confirms a significant overhaul of how motor vehicle FBT gets calculated, the first real change to the system in over 40 years. The current day-count, private-use-percentage approach — the one used in John’s example above — is set to be replaced with a category-based system of six categories, each with a fixed inclusion rate depending on how the vehicle is used. Logbooks are expected to matter less under the new system, though not disappear entirely.

Note that some detail may still change before 1 April 2027. It applies specifically to employees, though, so the working-owner exemption discussed above should remain relevant either way. If your LTC does have genuine employees using company vehicles, it’s worth watching this space — and worth knowing that if your LTC provides no more than two vehicles as unclassified benefits, you may be able to elect into the existing subpart DE rules instead of the new category system entirely. We cover the full detail in Motor Vehicle FBT Changes.

What If My Company Isn’t an LTC?

The FBT and employee-status rules above are specific to LTCs, because of the working-owner carve-out. If you’re operating through a standard company instead, the analysis is different. See Should I Get the Company to Buy Me a Car? for that scenario specifically.

Checklist

• ✅ Confirm whether you’re a genuine employee of the LTC, or a working owner without an employment contract
• ✅ If you’re a working owner, budget for the private-use portion becoming a non-deductible cost and a deemed distribution, not a free benefit
• ✅ Track private-use percentage accurately, since it drives both the depreciation adjustment and the running-cost split
• ✅ Keep an eye on the FBT changes taking effect 1 April 2027 if your LTC does have employees using company vehicles
• ✅ If you have two or fewer vehicles and genuine employees, check whether the subpart DE alternative suits you better than the new category system
• ✅ If your company isn’t an LTC, check the separate rules that apply instead

Common Questions

Does this mean an LTC-owned car is effectively “free” for a working owner? No. You avoid FBT. But the private-use portion of the car’s costs becomes non-deductible for the LTC, and gets treated as a distribution of profit to you. It’s a different tax outcome, not a free pass.

What if the LTC does have a genuine employee? Then FBT applies in the normal way — the same as it would for any other employer providing a vehicle to staff.

Do the 2027 FBT changes affect working owners? The reform is aimed at the employee FBT calculation specifically. The working-owner exemption is a separate provision, so it should continue to apply regardless. Keep an eye on the final legislation once it’s confirmed, though.

Legislative References

For the technical detail: sections HB 1, DC 3B, and the definitions of “employee,” “employer,” “working owner,” and “contract of employment” in YA 1 of the Income Tax Act 2007, together with the NZICA Commentary to the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill 2011.

Still Have Questions?

Working through whether your LTC can buy you a car, and what it’ll actually cost in tax terms, is worth getting right before you buy — not after.

Contact EpsomTax.com or give us a call on 09 973 0706. We work with LTC owners every day, and can confirm exactly how this applies to your situation.