With the 2024-2025 FBT year ending on 31 March, we've provided a quick and helpful Q&A guide around the key Fringe Benefits Tax issues for employers.
And you can catch up with our FBT Top Tips for 2025 with this quick video presentation by our in-house FBT Champion, Janolla Weatherhead.
If you need help with your FBT obligations or you have an FBT question that we haven't answered below, please contact us at The Peak Partnership and we'll get you back on FBT track.
If you’re an employer in Australia, you may have heard of Fringe Benefits Tax. FBT is a tax on non-cash benefits that you provide to your employees or their associates. In this quick guide, we’ll go over the basics of FBT and what you need to know to comply with the law.
Fringe benefits can be a valuable way to attract and retain employees, but they are also subject to Fringe Benefits Tax.
FBT is a tax on the value of fringe benefits that you provide to your employees or their associates. It is separate from income tax and is paid by the employer, not the employee.
The FBT rate is currently set at 47%, which means that for every $1 of fringe benefit provided, the employer must pay an additional 47 cents in FBT. However, some exemptions and concessions may apply.
The idea behind FBT is that fringe benefits are considered a form of income, just like a salary or wages, and should therefore be subject to taxation.
The employer is responsible for paying the tax on behalf of the employee as they are the ones providing the benefit to the employee.
Private use of business assets is an area that crosses across a whole series of tax areas; FBT, GST, Division 7A, and income tax.
Take the ATO’s example of the property company that claimed deductions for a boat on the basis that it was used for marketing the company. Large deductions were claimed for the upkeep and running of the boat.
On review, the ATO discovered the boat was used by the director and other employees for private trips and to host parties for people who had paid to attend the company's property seminars.
When looking at the activities of the business overall, the ATO determined that the director had purchased the boat primarily for their own private use. As a result, they disallowed the deductions and the private use of the boat was a fringe benefit for the employees of the company.
The company had to lodge an FBT return and pay the resulting FBT liability, as well as the income tax shortfall, interest and penalties.
The ATO is picking up mismatches between the amount reported as an employee contribution on an FBT return compared to the income amounts on an employer's tax return.
The ATO focuses on mismatches between the employee contributions relating to the fringe benefits, which are reported on the employer’s fringe benefits tax return, and reporting those contributions as income on their income tax return.
In particular, what concerns the ATO is where the employer has incorrectly overstated the employee contributions that they have received on their fringe benefits tax return to reduce the taxable value of the fringe benefits provided (and thereby, the employer’s FBT liability).
The ATO's approach is very evidence-based, there needs to be documentation to back up whatever the business is claiming.
Just because your business buys a motor vehicle and it is used almost exclusively for work, that alone does not mean that the car is exempt from FBT. If you use the car for private purposes - pick the kids up from school, do the shopping, use it freely on weekends, garage it at home, your spouse uses it – FBT is likely to apply. The private use of work vehicles is firmly in the sights of the ATO and has been for some time.
Private use is when you use a car provided by your employer (this includes directors) outside of simply travelling for work related purposes.
While there are two methods to calculate the FBT liability on the private use of a car, the choice of method can result in very different FBT liabilities. For example, using the logbook method may provide a better result especially this year if the work vehicle has not been used at all and garaged at or near the employee’s home. This is because if your business keeps a valid logbook/odometer records and is eligible to use the logbook method, the ATO will accept that a FBT liability won’t arise if the car:
In comparison, if the statutory method is used, the FBT liability could be much higher. This is because the FBT calculation under this method will include the days that the car has been garaged at home and is taken to be available for private use of the employee (regardless of whether or not the employee has permission to use the car privately).
Similarly, where the place of employment and residence are the same, the car is taken to be available for the private use of the employee.
The ATO has recently clarified its position on what is a commercial parking station for the purposes of determining whether a car parking fringe benefit has been provided. Where an employer provides:
a taxable car parking fringe benefit will arise, unless the employer is a small business and is able to satisfy the small business car parking exemption for the most recently completed FBT year.( where aggregate turnover is less than $50 million or the employer’s total income for that FBT year is less than $10 million).
A commercial parking station is defined to include:
If you would like to discuss whether car parking fringe benefits impact you and your business, please contact us.
Since 01 January 2020, salary sacrifice contributions of the employee have been excluded from the calculation of ordinary time earnings (OTE) for superannuation guarantee (SG) paid by the employer.
The benefit of salary sacrifice amounts is that they can be exempt fringe benefits, so therefore not subject to Fringe Benefits Tax (FBT).
If you would like to discuss how you could offer salary sacrificed benefits that are exempt from FBT your employees, please contact us.
There are a number of exemptions and concessions available for certain types of fringe benefits. For example, some work-related items (such as tools or laptops) may be exempt from FBT if they are used primarily for work purposes.
You can find out more about these exemptions and concessions from ATO website.
It can be difficult to ensure records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time.
If your business has cars and you need to record odometer readings at the first and last days of the FBT year (31 March and 01 April), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.
It’s essential for employers to annually assess whether they have an FBT liability based on the fringe benefits provided to their employees or their associates during the previous FBT year, which runs from 01 April to 31 March.
If you identify that your business has an FBT liability, it’s critical to lodge an FBT Return with the Australian Tax Office and pay the required amount by the due date of 21 May each year (for paper lodgements) or 25 June (where your tax agent lodges the FBT Return electronically).
We have seen an increase in ATO reviews and audits with a focus on employer obligations such as Fringe Benefits Tax (FBT). This is particularly the case where common fringe benefits are provided to employees such as company cars and entertainment expenses.
When an FBT return is lodged, generally, the standard amendment period will apply, which is 3 years from date of assessment. If no FBT return is lodged, an unlimited amendment period will apply.
If you provide fringe benefits and the total taxable value is reduced to $nil (e.g. by employee contributions, applying the minor and infrequent exemption etc.) you can lodge a $nil FBT return. If you would like to discuss this option further, please get in touch.
In late 2022, the Government introduced a concession that enables employers to provide electric vehicles to employees which can be exempt from FBT.
The exemption applies to the use of eligible electric cars, hydrogen fuel cell electric cars and some plug-in hybrid electric cars if:
If your business is planning on acquiring an electric vehicle, be aware that from 01 April 2025, the FBT exemption will no longer apply to plug-in hybrid electric vehicles unless the vehicle met the conditions for the exemption before this date and there is already a financial binding commitment in place, such as a purchase or lease agreement, to continue to use the vehicle privately after this date.
If you want to know more about FBT, check out our blog articles below or head to our Financial Fact Sheets page to download our guides to FBT.