Fringe Benefits Tax Explained for Employers: An Australian Guide

Providing perks like company cars, team dinners, or paying back employee expenses seems like standard practice. But in Australia, these everyday perks can quickly trigger Fringe Benefits Tax, and surprise employers at tax time.

FBT sits outside the normal payroll and income tax system and can apply to businesses of any size. Understanding it early can help employers avoid unexpected bills and keep the right records.

What Is Fringe Benefits Tax?

Fringe benefits tax is generally paid by an employer when certain non-cash benefits are provided to an employee, or their associate, such as a family member, because of the employee’s work.

FBT is separate from income tax and is paid by the employer. The FBT year runs from 1 April to 31 March. The current FBT rate is 47% for the FBT years ending 31 March 2023 through 31 March 2027.

Providing a benefit does not automatically create an FBT bill. The result depends on the type of benefit, its taxable value and whether an exemption, concession or reduction applies.

Common Benefits That May Attract FBT

Common FBT risks include:

• Private use of a company-owned or leased car.

• Car parking provided near the workplace.

• Staff parties, restaurant meals and entertainment.

• Payment or reimbursement of private expenses.

• Low-interest or interest-free employee loans.

• Housing or accommodation.

• Salary-packaged benefits.

The ATO has different rules for different categories of benefits, including cars, car parking, loans, expense payments, housing, entertainment and property benefits.

A car fringe benefit may arise when an employee keeps a company car at home, and it is available for private use, even if they rarely use it outside work.

Staff entertainment also needs careful review. Its treatment may depend on attendees, location, cost per person and the valuation method used.

How Is FBT Calculated?

The employer first determines the taxable value of each benefit under the relevant valuation rules. Employee contributions and available reductions are then taken into account.

The remaining value is “grossed up” before the 47% FBT rate is applied. Grossing up reflects the pre-tax income an employee would need to earn, at the highest marginal tax rate including the Medicare levy, to purchase the benefit themselves.

The two gross-up rates are:

• Type 1: 2.0802 - generally used when the employer can claim a GST credit.

• Type 2: 1.8868 - generally used when the employer cannot claim a GST credit.

Because of grossing up, the FBT payable can be close to the benefit's original cost. Employers should check the tax impact before introducing a new perk or salary-packaging arrangement.

Practical Example: Reimbursing a Gym Membership

Cover a $3,000 gym membership for an employee, and Morden Pty Ltd gets hit with an extra $2,933 in FBT. That $3k perk ends up costing almost $6,000.

This is the gross FBT outcome before considering any available GST credits or income tax deductions for the benefit and the FBT paid.

• Type 1 gross-up: $3,000 × 2.0802 = $6,240.60

• FBT payable (47%): $6,240.60 × 47% = $2,933.08

Because the total taxable value of the reportable fringe benefits provided to the manager is more than $2,000, BrightBuild would generally need to report a Reportable Fringe Benefits Amount of approximately $5,660 through Single Touch Payroll on the employee’s income statement. This amount is calculated using the lower gross-up rate of 1.8868.

Common benefits and the records you’ll usually need

Company car	Employee uses a work vehicle for private trips	Car fringe benefit may apply	Logbook, odometer readings, running costs
Expense reimbursement	Business pays an employee’s private gym membership	Expense payment fringe benefit may apply	Invoice, proof of reimbursement, any declarations
Staff entertainment	Business pays for a staff dinner	Entertainment FBT rules may apply	Who attended, date, location, purpose and cost
Employee loan	Business gives a staff member a low-interest loan	Loan fringe benefit may apply	Loan agreement, outstanding balance, interest charged
Eligible electric car	Business provides a qualifying EV	Often exempt, but you may still need to report it	Purchase details, vehicle value and eligibility evidence

The records required will depend on the benefit and the valuation method used. Company cars may require logbooks, odometer readings and running-cost records. For expense reimbursements, employers should generally retain the invoice, proof of reimbursement, taxable value calculations, and any employee declarations needed to support an exemption or reduction.

Exemptions and Reductions to Consider

Eligible work-related items, including certain portable electronic devices, protective clothing and tools of trade, may be exempt when the relevant conditions are satisfied.

Some benefits might get the minor benefits exemption if the notional taxable value is under $300 and they’re only given every now and then, not regularly. Just looking at the price isn’t enough. You have to consider the whole situation.

Expenses eligible for an employee's personal tax deduction (such as a professional subscription vs. a gym membership) reduce the taxable value of fringe benefits. You just need supporting records or declarations.

Eligible electric and hydrogen cars get an FBT exemption. Plug-in hybrids mostly stopped qualifying from 1 April 2025, unless transitional rules apply to existing arrangements.

Reporting, Deadlines and Record Keeping

Employers with an FBT liability generally need to lodge an annual FBT return. The standard lodgment and payment deadline is 21 May. When a registered tax agent lodges electronically, the deadline is generally 25 June, subject to the ATO lodgment program. To access this concession, the employer generally needs to be added to the tax agent’s FBT client list by 21 May.

If the total taxable value of certain reportable benefits provided to an employee exceeds $2,000 during the FBT year, the employer generally reports a grossed-up amount through Single Touch Payroll or on the employee’s payment summary.

The reported amount is not added to the employee’s taxable income, but it may affect income-tested benefits, obligations and repayment calculations.

FBT records generally need to be kept for five years. These may include invoices, employee declarations, vehicle logbooks, entertainment records, loan agreements and calculation worksheets.

Get Ahead of FBT Before 31 March

FBT problems usually show up after year-end, when receipts have gone missing, or no one kept track of private use. The better approach is to spot benefits as they arise and review any new arrangements before they start.

Clear Tax can review your employee benefits, identify available exemptions and reductions, calculate your FBT liability and prepare your return. Getting advice early can make the process simpler and reduce the risk of expensive surprises.