Fringe Benefits Tax Overview

Fringe benefits tax works backwards from what most owners expect: it is a tax on the employer, not the employee, and it applies to perks rather than wages. The company car, the paid gym membership, the school fees put through the business — once FBT is added, the real cost of a perk can be close to double its sticker price, and the bill lands with you.

Which perks are caught

FBT applies to most non-cash benefits provided to employees or their family members because of their employment. Common small business examples include a car available for private use, car parking, entertainment, paying or reimbursing private expenses, low-interest loans and housing. Directors who work in their own company count as employees for FBT, which is where many private businesses get caught.

The FBT year runs from 1st April to 31st March, not the standard financial year, and it has its own registration, return and payment cycle.

How the numbers work

The taxable value of a benefit is grossed up — multiplied by 2.0802 where you could claim GST credits on it, or 1.8868 where you could not — and FBT is levied on that grossed-up amount at 47 percent. As an illustration only, a benefit costing $1,000 including GST could translate to roughly $978 of FBT once grossed up and taxed — almost doubling the real cost of the perk.

There are important carve-outs. Benefits under $300 per employee that are provided infrequently and irregularly can be exempt as minor benefits. Some work tools and portable electronic devices are exempt. Certain electric vehicles are exempt subject to conditions, and the rules for plug-in hybrids changed from 1st April 2025, so check the current ATO guidance before relying on this. Employee contributions towards a benefit can also reduce its taxable value.

If the taxable value of benefits for an employee exceeds $2,000 in an FBT year, a grossed-up reportable amount appears on their income statement and can affect things like the Medicare levy surcharge and study loan repayments.

What we commonly see go wrong

• Utes and vans assumed to be automatically exempt, when the private use goes beyond the limited allowance the exemption permits.
• No logbook or odometer records for a company car, which limits the valuation methods available.
• Director-shareholders using business assets privately with nothing documented — this can raise FBT and Division 7A issues at the same time.
• Businesses providing benefits for years without ever registering for FBT or considering a return.
• Employee contributions journalled at year end without thinking through the GST and income tax treatment.

When to get advice

If your business provides any regular perk — especially vehicles — it is worth having the FBT position reviewed before the FBT year closes, while there is still time to keep records or adjust arrangements. We see far better outcomes when this is looked at during the year rather than reconstructed afterwards.

Do I need to lodge an FBT return if no FBT ends up payable?

If you are registered for FBT but have no liability for the year, you generally notify the ATO rather than simply doing nothing. Either way, keep the records that support your position — exemptions like minor benefits rely on being able to show the facts.

Does FBT apply to benefits for the business owner?

It depends on the structure. A director employed by their own company or trust is an employee for FBT purposes, but a sole trader or partner is not an employee of themselves, so benefits they take personally are dealt with under other rules instead.

When is the FBT return due?

The FBT year ends on 31st March and paper returns are generally due by 21st May, with later dates when lodging electronically through a tax agent — check the current ATO dates for your situation.