Ways to value motor vehicles for fringe benefit tax

You need to work out a motor vehicle’s value before you can calculate how much fringe benefit tax (FBT) to pay on it. You can use the cost price method or the tax book value method.

Both methods may be calculated on a GST-inclusive or GST-exclusive basis.

Calculating taxable value for private use of vehicles

Using your valuation method

When you have chosen your valuation method, you must continue to use it until the earliest of the following dates.

• The date the vehicle is sold.
• If leased, the date you stop leasing the vehicle.
• The date that is 5 years after the start of the period of the 1st return for that vehicle.

Cost price

Cost price includes the original purchase price and initial up-front costs.

Cost price does not include annual re-licencing fees, the cost of financing the purchase, reductions from trading in a vehicle or the State Sector Decarbonisation Fund.

If you have claimed Investment Boost, this is not deducted from the cost price.

Tax book value

Tax book value if no Investment Boost has been claimed is:

• the vehicle’s original cost price, less the total accumulated depreciation on the vehicle at the start of the tax or income year
• the cost price of the vehicle, if acquired after the beginning of the tax or income year.

From 1 April 2026, tax book value if Investment Boost has been claimed is:

• the vehicle’s original cost price, less Investment Boost and the total accumulated depreciation on the vehicle at the start of the tax or income year
• the cost price of the vehicle if you got it after the beginning of the tax or income year.

Note: Investment Boost vehicles must be pooled separately from other vehicles. 

From 1 April 2026, new fringe benefit valuation rates apply to vehicles if you have claimed Investment Boost on them. 

Minimum tax book value

When the vehicle value drops below the minimum, you must use the minimum value depending on whether you have claimed Investment Boost or not.

The minimum value applies because the employee still has an ongoing private use benefit, even when the vehicle has significantly depreciated.

Leased vehicles

You can calculate FBT using the cost price or tax book value for vehicles you lease from another person (the lessor). The lessor must let you know the vehicle cost price or tax book value, including an Investment Boost deduction if claimed by the lessor.

Vehicles acquired at no cost or less than market value

Market value is the price that would normally be paid in the open market when the employee receives the benefit. You must have records to support the market value used.

The cost price of the motor vehicle is treated as being equal to the vehicle’s market value:

• for a vehicle you got at no cost
• when you cannot establish the cost price to our satisfaction.

The market value applies if you enter an arrangement with an associated person to get a vehicle at a cost price less than market value, and that arrangement was set up to avoid the FBT rules.

Value of pooled motor vehicles

If you have more than 1 vehicle available for an employee to use, the cost price or tax book value depends on the following.

More information

Go to Part 2 - Motor vehicles in the Fringe benefit tax guide – IR409.

Motor vehicles provided by employers for private use

Calculating taxable value for private use of vehicles

Record keeping for FBT