Fringe benefits tax (FBT)

What Is Fringe Benefits Tax (FBT)?

Fringe Benefits Tax (FBT) is a tax paid by employers on certain benefits provided to employees (or their associates, such as family members) in place of, or in addition to, their regular salary or wages. Introduced in 1986, FBT ensures that non-cash benefits, such as a company car or entertainment—are taxed fairly, just like income.

In Australia, FBT is governed by the Fringe Benefits Tax Assessment Act 1986 and is administered by the Australian Taxation Office (ATO).

ATO – Fringe Benefits Tax

Examples of Fringe Benefits

Fringe benefits can take many forms. Common examples include:

• Company cars used for personal purposes
• Entertainment expenses, such as meals or event tickets
• Private health insurance paid by the employer
• Discounted loans
• Housing or accommodation
• Living-away-from-home allowances
• Reimbursement of private expenses (e.g. school fees, child care)
• Gift cards and non-cash bonuses
• Parking provided near the workplace

If the benefit is something of value provided outside of regular wages or super, it’s likely subject to FBT.

Who Pays FBT?

FBT is paid by the employer, not the employee. Even though the benefit is given to an employee, it’s considered a cost of doing business and is separate from income tax or PAYG withholding.

Employers must:

• Calculate the grossed-up taxable value of the benefits
• Submit an FBT return annually
• Pay the FBT liability to the ATO

FBT Rate and Gross-Up

For the 2024–25 FBT year, the FBT rate remains at 47%. To ensure fairness between cash and non-cash benefits, the ATO applies a gross-up factor, which inflates the value of the benefit to its pre-tax equivalent. There are two gross-up rates:

The grossed-up value is then multiplied by the 47% FBT rate to determine your total tax liability.

ATO – FBT Rates and Thresholds

When Is the FBT Year?

The FBT year runs from 1 April to 31 March (not aligned with the standard financial year). Employers must:

• Calculate FBT owed by 31 March
• Lodge the FBT return by 21 May (or later if using a tax agent)
• Pay FBT to the ATO by the due date

Are There FBT Exemptions or Reductions?

Yes, not all benefits are taxable. There are exemptions and concessions that reduce or eliminate FBT liability, including:

Exempt Benefits

• Work-related items like laptops, phones, and tablets (used primarily for work)
• Minor benefits under $300 (e.g. Christmas gifts, team lunches)
• Relocation expenses
• Remote area housing (in certain cases)

Reductions

• Employee contributions: if the employee reimburses part of the benefit, the taxable value is reduced
• Otherwise deductible rule: if the employee would have been able to claim the benefit as a deduction, FBT may not apply

FBT and Salary Packaging

Salary packaging (or salary sacrifice) allows employees to receive fringe benefits in exchange for lower taxable income. While this can be advantageous, employers must still manage and report FBT correctly.

FBT implications must be factored in when setting up packages involving:

• Novated leases
• Meal entertainment
• Additional super contributions
• Work-related devices

How to Stay FBT Compliant

FBT obligations can be complex. Best practices include:

• Keep detailed records of all benefits provided
• Use FBT declarations where applicable (e.g. logbooks for car use)
• Communicate with employees regarding benefit values and tax impact
• Consult with an accountant or FBT specialist annually

Microkeeper and FBT Tracking

While Microkeeper’s payroll system does not directly calculate FBT, it supports employers by:

• Recording employee earnings and benefits in one central place
• Integrating with accounting platforms for accurate reporting
• Capturing data needed for salary packaging and reimbursements

Employers can also attach documents (like FBT declarations or receipts) to employee records and utilise our audit-ready export functions to assist with annual FBT returns.

Explore Microkeeper Payroll Features

FAQs About FBT

Is superannuation subject to FBT?

‍No. Employer-paid super contributions are not considered fringe benefits and are instead governed by superannuation legislation.

Are gifts taxable under FBT?

‍Gifts may be exempt if classified as minor benefits (under $300 per occasion and infrequent). Cash bonuses, however, are always considered taxable income and not fringe benefits.

Can contractors receive fringe benefits?

‍No. FBT only applies to employees or their associates. Independent contractors are not covered by the FBT framework.

Final Thoughts

Fringe Benefits Tax (FBT) plays a critical role in ensuring fairness in Australia’s tax system by capturing non-cash benefits provided to employees. While it adds a layer of complexity for employers, understanding how FBT works, and keeping accurate records, can help avoid penalties and support compliant, employee-friendly workplaces.

Whether you’re managing company vehicles, offering perks, or exploring salary packaging, it's essential to understand your FBT obligations and integrate them into your annual processes.

_{Disclaimer: This article is for informational purposes only and does not constitute tax or legal advice. Please consult with a registered tax professional or the ATO for personalised guidance.}