I wanted to use Time Machine on my exFAT hard drive, but turns out that these volumes aren’t supported from Time Machine! There is a very simple way to use Time Machines on unsupported hard drives, as long as you follow these instructions carefully you shouldn’t have any issues at all.

First, connect the unsupported volume (in this case, an exFAT external hard drive.) When it mounts, open the Terminal and type these commands, substituting ‘My External HDD Name’ for the name of the unsupported volume.

cd /Volumes
cd ‘My External HDD Name’

Next, type this code, substituting for your needs:

hdiutil create -size 320g -type SPARSEBUNDLE -fs “HFS+J” MacBook-Backup.sparsebundle
open MacBook-Backup.sparsebundle

Here, a 320GB sparse bundle named ‘MacBook-Backup’ is being made and mounted. You can change these values as you see fit. From herein, I’ll refer to the sparse bundle name as ‘MacBook-Backup’.
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Source: Mac OSX Hints