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).
Fringe benefits can take many forms. Common examples include:
If the benefit is something of value provided outside of regular wages or super, it’s likely subject to 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:
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
The FBT year runs from 1 April to 31 March (not aligned with the standard financial year). Employers must:
Yes, not all benefits are taxable. There are exemptions and concessions that reduce or eliminate FBT liability, including:
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:
FBT obligations can be complex. Best practices include:
While Microkeeper’s payroll system does not directly calculate FBT, it supports employers by:
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
No. Employer-paid super contributions are not considered fringe benefits and are instead governed by superannuation legislation.
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.
No. FBT only applies to employees or their associates. Independent contractors are not covered by the FBT framework.
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.