# Grey Fleet vs Company Cars (Australia)

**URL:** https://community.mycartracks.com/t/grey-fleet-vs-company-cars-australia/395
**Category:** Grey Fleet Guides (Australia)
**Tags:** company-cars, reimbursement, fbt, australia, grey-fleet
**Created:** 2026-05-14T12:50:35Z
**Posts:** 1

## Post 1 by @MyCarTracks_support — 2026-05-14T12:50:36Z

Compare grey fleet vs company cars by starting with business kilometres, vehicle control, FBT exposure, employee preference, and records. A grey fleet is usually simpler for occasional or lower-kilometre work travel. Company cars can make more sense for high-kilometre roles, branded vehicles, specific safety standards, or eligible electric vehicle programs.

The tax side matters because an employer-provided car can raise fringe benefits tax questions when it is available for private use. The [ATO car fringe benefit guidance](https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/cars-and-fbt/taxable-value-of-a-car-fringe-benefit) uses the statutory formula method or operating cost method, while [ATO allowance and reimbursement guidance](https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/payg-withholding/payments-you-need-to-withhold-from/payments-to-employees/allowances-and-reimbursements) keeps employee payments in a separate payroll and recordkeeping lane.

This guide is for Australian employers, CFOs, finance teams, HR teams, operations managers, and fleet administrators. It is educational only and is not tax, WHS, payroll, legal, insurance, employment, or financial advice.

 ![Grey fleet vs company cars decision matrix](https://community.mycartracks.com/uploads/default/original/1X/bb456e7bde91e881f223f6fe2c5d797eb4bb260c.svg)

## Quick answer

Choose a grey fleet when work driving is occasional, distributed across many employees, or best handled through trip-level reimbursement and clear private-vehicle checks. Choose company cars when roles drive high annual kilometres, the organisation needs tighter control over vehicle age and safety standards, the vehicle represents the brand, or an employer-provided EV program has a clear FBT and salary-packaging case.

Most organisations do not need one model for everyone. A mixed program often works best: company cars for high-use or high-control roles, grey fleet for occasional drivers, and separate rules for car allowances, novated leases, pool cars, and exact reimbursements.

## Grey fleet vs company cars: the two models

**Grey fleet:** employees, contractors, volunteers, or other workers use non-company vehicles for work. The employer does not buy or lease the vehicle, but still needs a process for licence, registration, roadworthiness, business-use insurance, mileage records, reimbursement, incident reporting, and WHS review.

**Company cars:** the employer buys, leases, or otherwise provides vehicles. The business usually controls vehicle choice, servicing, registration, insurance, fuel or charging, safety standards, and private-use rules. If the car is available for private use, FBT may be relevant.

| Scenario | Usually better fit |
| --- | --- |
| Lower annual business kilometres | Grey fleet with trip-level reimbursement |
| High annual business kilometres | Company car or mixed fleet |
| Specific safety, equipment, or brand requirements | Company car |
| Distributed team with occasional trips | Grey fleet |
| Employee choice matters more than vehicle consistency | Grey fleet or car allowance, with controls |
| Eligible EV salary packaging or emissions strategy | Company car, employer-leased car, or novated lease after FBT review |
| Unclear insurance, licence, or vehicle evidence | Neither until checks are complete |

## Grey fleet costs

The employer’s main grey fleet cost is business use. The employee usually carries the private vehicle’s purchase, lease, depreciation, registration, insurance, servicing, tyres, and day-to-day running costs.

Common employer payment models include:

- cents per kilometre payments based on approved work kilometres
- exact reimbursements for supported expenses
- a car allowance paid through payroll
- a combination, if the policy and payroll treatment are clear

For 2024-25 and 2025-26, the [ATO work-related car expenses](https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/cars-transport-and-travel/motor-vehicle-and-car-expenses/expenses-for-a-car-you-own-or-lease) guidance lists 88 cents per kilometre for the cents per kilometre deduction method and a 5,000 kilometre cap in the employee deduction context. Do not treat that as a universal employer reimbursement requirement. Employer obligations can also come from an award, enterprise agreement, contract, or policy.

## Company car costs

Company cars shift more cost and control to the employer. Budget for:

- lease or purchase costs
- insurance, registration, tyres, servicing, repairs, and maintenance
- fuel, charging, tolls, parking, and cleaning
- fleet administration, procurement, disposal, and replacement planning
- FBT review, logbook, odometer, and private-use controls where needed
- downtime, damage, excess kilometres, and replacement-vehicle arrangements

The cost pattern is different from a grey fleet. A company car has fixed costs even when it is underused. It becomes more attractive when a role drives enough business kilometres to spread those fixed costs across real work use, or when direct vehicle control matters more than flexibility.

## Example cost comparison

The numbers below are illustrative only. Replace them with your lease quotes, insurance costs, fuel or charging assumptions, servicing costs, and actual mileage data before making a decision.

Assume one field consultant drives 18,000 business kilometres a year in a mid-size petrol car.

| Model | Calculation | Annual employer cost |
| --- | --- | --- |
| Grey fleet, cents per kilometre only | 18,000 km x $0.88 | $15,840 |
| Grey fleet, car allowance plus kilometre payment | $600 x 12 plus $15,840 | $23,040 |
| Company car, petrol lease example | $8,400 lease plus $2,400 insurance/maintenance plus $3,240 fuel estimate | $14,040 before FBT |

At this mileage level, a company car can be competitive before FBT because the fixed vehicle cost is spread across more work kilometres. At lower annual kilometres, the grey fleet model often stays cheaper because the employer pays only for approved work use. The crossover point can move quickly with lease pricing, fuel or charging costs, insurance, vehicle type, FBT, and how much private use is allowed.

## FBT and tax treatment

Company cars and grey fleet vehicles sit in different tax models.

For a company car, the employer may have a car fringe benefit when the car is made available for an employee’s private use. The ATO taxable-value guidance lets employers work out the value using either the statutory formula method or operating cost method. The operating cost method needs adequate records, including logbook and odometer support, to apportion private use.

For a grey fleet, the employer is usually paying for employee work travel rather than providing the vehicle. The ATO distinguishes allowances from reimbursements, and a car allowance paid through payroll is not the same as an exact reimbursement or a trip-based cents per kilometre payment. Keep the payment type clear in the policy and payroll records.

The [ATO FBT rates and thresholds](https://www.ato.gov.au/tax-rates-and-codes/fringe-benefits-tax-rates-and-thresholds) list the FBT rate used for current FBT years. Keep rate, gross-up, and threshold figures current rather than copying an old comparison table.

## Electric vehicles and PHEVs

Eligible electric cars can change the company-car comparison because the electric car FBT exemption can reduce the employer’s FBT cost where the conditions are met. Current ATO material ties eligibility to conditions such as the car being held and first used from 1 July 2022 or later and not being subject to luxury car tax.

For 2025-26, the [ATO car threshold update](https://www.ato.gov.au/businesses-and-organisations/small-business-newsroom/changes-to-car-thresholds-from-1-july) gives $91,387 as the fuel-efficient luxury car tax threshold. Check the current threshold before relying on an EV comparison.

Plug-in hybrid electric vehicles need separate review. The [ATO PHEV guidance](https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/fbt-on-plug-in-hybrid-electric-vehicles) says that from 1 April 2025, a plug-in hybrid electric vehicle is not considered a zero or low emissions vehicle for FBT law and is not eligible for the electric car exemption, except where transitional requirements are met.

## Control, safety, and WHS

Company cars give the employer more direct control over the vehicle. You can specify vehicle type, age, safety features, servicing, tyres, telematics, branding, equipment, and replacement timing.

Grey fleet gives employees more choice, but the employer needs a stronger approval and review process because the vehicle is not directly controlled. That process should cover the [grey fleet policy](https://community.mycartracks.com/t/grey-fleet-policy-guide-australia/393), [risk assessment](https://community.mycartracks.com/t/grey-fleet-risk-assessment-australia/394), licence checks, registration, business-use insurance, roadworthiness, mileage records, and incident reporting.

Do not treat the vehicle decision as purely financial. A high-mileage or high-risk role may justify a company car even if a simple reimbursement table looks cheaper. A low-mileage role may work well as grey fleet if the organisation keeps the checks and records current.

## Records each model needs

Both models need evidence, but the evidence is different.

| Record area | Grey fleet | Company car |
| --- | --- | --- |
| Driver | Licence, eligibility, declaration, role approval | Licence, policy acknowledgement, private-use rules |
| Vehicle | Registration, suitability, insurance confirmation, maintenance evidence where needed | Fleet register, lease/purchase records, registration, insurance, servicing |
| Trips | Date, route, purpose, kilometres, business/private classification | Odometer, logbook where needed, fuel/charging, private-use classification |
| Payments | Reimbursement rate, allowance, exact expense support, approvals | Fuel/charging, lease, running costs, employee contributions, FBT support |
| Risk | Vehicle approval, journey planning, incident reporting | Vehicle standard, use restrictions, servicing, incident reporting |

For deeper recordkeeping detail, use the Australia guides on [mileage reimbursement rules for employers](https://community.mycartracks.com/t/mileage-reimbursement-rules-for-employers-australia/344), [ATO car logbook requirements](https://community.mycartracks.com/t/ato-car-logbook-requirements-australia/340), and [car fringe benefits tax](https://community.mycartracks.com/t/car-fringe-benefits-tax-australia/341).

## How MyCarTracks helps compare options

Before changing vehicle models, look at actual driving data. A few high-mileage employees can make a company-car program look sensible, while a broad group of low-mileage occasional drivers may be better handled through grey fleet reimbursement.

[MyCarTracks automatic mileage tracking](https://www.mycartracks.com/products/automatic-mileage-tracking) can capture trips, classify business and private travel, and export reports by date, vehicle, driver, purpose, and distance. For teams, [MyCarTracks fleet tracking](https://www.mycartracks.com/products/vehicle-tracking) can help administrators review vehicle activity, team reports, and reimbursement records from one workflow.

Use those records to compare actual kilometres, reimbursement totals, frequent routes, role groups, and vehicles before deciding whether to buy, lease, reimburse, or mix models.

## When a mixed model works best

A mixed model is often the most practical answer.

Use company cars for roles that need:

- high annual kilometres
- specific safety standards or vehicle fit-out
- consistent branding or customer presentation
- equipment, stock, samples, or passenger transport
- direct control over servicing, replacement, and use restrictions

Use grey fleet for roles that need:

- occasional or lower-kilometre work travel
- distributed coverage without idle company vehicles
- employee vehicle choice
- variable work patterns
- a lighter setup, as long as policy, insurance, mileage, and risk controls are in place

Set thresholds and review them. A role that starts as occasional grey fleet can become a company-car candidate once kilometres, risk, or admin effort rises.

## Common mistakes

- Choosing on lease price alone and ignoring FBT, fuel, charging, servicing, insurance, downtime, and admin.
- Treating the ATO cents per kilometre rate as a mandatory employer payment rule.
- Calling a car allowance a reimbursement without checking payroll and tax treatment.
- Assuming grey fleet removes WHS, licence, registration, insurance, and incident-review work.
- Assuming a company car automatically avoids recordkeeping because the employer owns it.
- Treating eligible EVs, PHEVs, novated leases, company cars, car allowances, and employee-owned cars as one tax model.
- Comparing annual costs without actual kilometre data.

## FAQ

### Is a grey fleet cheaper than company cars?

Often, at lower annual kilometres. Grey fleet costs usually scale with approved work use, while company cars carry fixed costs even when underused. At higher kilometres, company cars can become more cost-effective, especially where direct control or eligible EV treatment matters.

### Do company cars always create FBT?

No. FBT depends on the car benefit and private-use availability. Some vehicles and uses may be exempt or treated differently, but the employer needs current ATO review and records.

### How is mileage reimbursement treated?

It depends on the payment type and records. A trip-based cents per kilometre payment, exact reimbursement, and car allowance are not the same. Keep the policy aligned with ATO, payroll, award/agreement, contract, and adviser review.

### Can employees choose between a car allowance and a company car?

They can if the employer offers that choice, but the tax, payroll, FBT, insurance, and recordkeeping outcomes differ. Put the options in writing and make sure employees understand the consequences before choosing.

### Does an EV make a company car the best option?

Not automatically. Eligible EVs can improve the company-car case when the FBT exemption applies, but vehicle price, charging, role requirements, private use, salary packaging, and PHEV transition rules still need review.

## Where to go next

- [What Is a Grey Fleet? (Australia)](https://community.mycartracks.com/t/what-is-a-grey-fleet-australia/392)
- [Grey Fleet Policy Guide (Australia)](https://community.mycartracks.com/t/grey-fleet-policy-guide-australia/393)
- [Grey Fleet Risk Assessment (Australia)](https://community.mycartracks.com/t/grey-fleet-risk-assessment-australia/394)
- [Mileage Reimbursement Rules for Employers (Australia)](https://community.mycartracks.com/t/mileage-reimbursement-rules-for-employers-australia/344)
- [Current ATO Cents Per Kilometre Rate (Australia)](https://community.mycartracks.com/t/current-ato-cents-per-kilometre-rate-australia/334)
- [Car Fringe Benefits Tax (Australia)](https://community.mycartracks.com/t/car-fringe-benefits-tax-australia/341)

## Sources

- [ATO: Taxable value of a car fringe benefit](https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/cars-and-fbt/taxable-value-of-a-car-fringe-benefit)
- [ATO: Allowances and reimbursements](https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/payg-withholding/payments-you-need-to-withhold-from/payments-to-employees/allowances-and-reimbursements)
- [ATO: Expenses for a car you own or lease](https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/cars-transport-and-travel/motor-vehicle-and-car-expenses/expenses-for-a-car-you-own-or-lease)
- [ATO: Fringe benefits tax rates and thresholds](https://www.ato.gov.au/tax-rates-and-codes/fringe-benefits-tax-rates-and-thresholds)
- [ATO: Changes to car thresholds from 1 July](https://www.ato.gov.au/businesses-and-organisations/small-business-newsroom/changes-to-car-thresholds-from-1-july)
- [ATO: FBT on plug-in hybrid electric vehicles](https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/fbt-on-plug-in-hybrid-electric-vehicles)
- [Safe Work Australia: Vehicle hazards](https://www.safeworkaustralia.gov.au/book/health-care-and-social-assistance/hazards-risks-and-controls/vehicle-hazards)
- [Comcare: Vehicles as a workplace](https://www.comcare.gov.au/safe-healthy-work/prevent-harm/vehicles-as-a-workplace)
- [Fair Work Ombudsman: Allowances](https://www.fairwork.gov.au/pay-and-wages/penalty-rates-allowances-and-other-payments/allowances)