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 23 October 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.
• An owner with no employment contract isn’t an employee, so FBT doesn’t apply. The special “working owner” category covers only an owner employed under a written contract in an LTC that isn’t mainly investing or holding land. A rental-only LTC can’t have one.
• 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. An LTC owner with no employment contract isn’t an employee. That is John’s position in our example below.

LTCs also have a special category called a “working owner”. A working owner is employed by the LTC under a written contract of employment and personally performs the duties of that job. IRD’s 2010 article on the LTC rules says the category doesn’t apply if the LTC is wholly or mainly investing money or holding or dealing in interests in land. So an LTC that owns rental property can’t have a working owner. IRD’s article on the 2012 LTC changes confirms that a working owner isn’t treated as an employee for FBT.

Can the LTC Can Buy Me a Car With No FBT?

Yes. If you’re an owner rather than an employee, FBT doesn’t apply to the car. The same goes for a working owner in an LTC that runs a business. That isn’t the end of the story. IRD treats a benefit an LTC gives to a shareholder as a distribution of profits, not as a business expense. So the LTC can’t deduct the private-use share of the car’s costs. Otherwise every owner would get a deduction for one owner’s private benefit.

The cost doesn’t disappear. It stays in the LTC’s profit, and the profit is shared by shareholding.  Let’s see how that might work:

Worked Example: John and Mary’s LTC Buys John a Car

John and Mary each hold 50 of the 100 shares in an LTC. The LTC owns one rental property. It has no employees, and neither owner has an employment contract with it. The LTC buys a $10,000 car for John. John keeps a logbook. It shows he uses the car 90% for private trips and 10% for visiting the rental property.

Does FBT apply? No. FBT applies to benefits provided to employees, and John isn’t an employee of the LTC. The “working owner” category doesn’t apply either. IRD says an LTC that mainly holds interests in land can’t have working owners.

What can the LTC claim? Only the business share. The car costs $4,000 a year to run. 10% is business use, so the LTC claims $400. The other $3,600 is private and isn’t deductible. Depreciation on the car follows the same split. This example leaves it out to keep the numbers simple.

What does the LTC report?

• Rental income: $40,000
• Total expenses, including the $4,000 of car running costs: $24,000
• Remove the non-deductible $3,600: expenses of $20,400
• Net profit: $19,600
• Each owner’s 50% share: $9,800

What happens to the $3,600? IRD treats a benefit an LTC gives to a shareholder as a distribution of profits, not a business expense. So John is treated as receiving a $3,600 distribution. The distribution isn’t taxed again. IR879 says LTC dividends aren’t taxable, because the LTC’s profit is already taxed in the owners’ returns.

	John	Mary
Share of LTC profit	$9,800	$9,800
Deemed distribution to John (not separately taxed)	$3,600	none
Income to declare from the LTC	$9,800	$9,800

The catch: Mary declares $9,800 too. Her share of profit is $1,800 higher than if the car costs were deductible ($8,000). She doesn’t drive the car.

The lesson: Buying the car through the LTC avoids FBT, but it doesn’t make John’s private use deductible. The LTC claims about 10% of the costs. Both owners are taxed on the rest.

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. The new categories apply to vehicles provided to employees.  (In our working example above, John isn’t an employee, so they don’t apply to him.) 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?

If you operate through a standard company, the analysis is different. A shareholder-employee of an ordinary company is an employee. IRD says FBT may apply to a vehicle available for private use by employees, including shareholder employees, even if they don’t use it. See Should I Get the Company to Buy Me a Car? for that scenario specifically.

Checklist

• ✅ Check whether you have an employment contract with the LTC. If you don’t, you’re not an employee and FBT doesn’t apply
• ✅ Remember a “working owner” needs a written employment contract and an LTC that isn’t mainly holding rental property or other investments
• ✅ Budget for the private-use share of the car’s costs being non-deductible. It is treated as a distribution of profit, 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 an 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 LTC owners? The reforms change how FBT is calculated for vehicles provided to employees. An owner who isn’t an employee isn’t within FBT in the first place.

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. See also section GB 32 (benefits provided by an LTC to a shareholder), section HB 11(6) and section RD 5(3). And of course, see IR879, which is the LTC Guide from IRD.

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.