Fringe Benefits Tax (FBT) is a tax that employers must pay on non-cash benefits provided to employees (or their family members) in addition to salary or wages. It applies to all business structures, including companies, partnerships, and sole traders with employees. It even applies to non-profit organisations (although some exemptions apply for charities).
The idea behind FBT is simple: If an employer provides a benefit that an employee would otherwise have to pay for themselves, the ATO considers it a form of income—even if no cash is exchanged.
What Counts as a Fringe Benefit?
A fringe benefit is any non-cash perk an employer provides to an employee in place of or in addition to their salary. This can include:
- Company cars available for private use
- Discounted loans, such as interest-free loans to employees
- Free or subsidised health insurance
- Entertainment expenses, including work-sponsored holidays, concert tickets, or restaurant meals
- Gym memberships or wellness programs
- Housing benefits, such as rent paid for an employee’s home
- Work-related items such as laptops and phones, which in some cases may be exempt
For example, if a company provides an employee with a car they can use outside of work hours, this is considered a non-cash benefit. Even though no money is exchanged, the employee still receives value, so the ATO requires the employer to pay tax on this benefit through FBT.
Who Pays FBT and How Is It Calculated?
FBT is paid by the employer, not the employee, on certain non-cash benefits provided to employees or their associates. The tax is separate from income tax and is calculated based on the grossed-up taxable value of the fringe benefit.
To determine the FBT payable, employers must:
- Identify all taxable fringe benefits provided during the FBT year (April 1 – March 31).
- Apply the relevant gross-up rate, which adjusts for the tax employees would have paid if the benefit was taken as income.
- Type 1 benefits (where GST credits can be claimed) are grossed up at 2.0802.
- Type 2 benefits (where no GST credits are claimed) are grossed up at 1.8868.
- Multiply the grossed-up value by the FBT rate, which is currently 47% (aligned with the highest marginal tax rate to prevent tax avoidance).
- For example, if an employer provides a $5,000 benefit (with GST credits available), the FBT payable would be:
$5,000 × 2.0802 × 47% = $4,888.47 in FBT
Because FBT is a self-assessed tax, employers must ensure they calculate it correctly and meet lodgement deadlines to avoid penalties.
Key FBT Dates for 2025
FBT year ends: March 31, 2025
Lodgement and payment due (if lodging directly with ATO): May 21, 2025
Extended deadline (if using a registered tax agent): June 25, 2025
If you are using a tax agent for the first time, you must be added to their FBT client list by May 21, 2025.
Before March 31: Your FBT Checklist
Make sure you have:
- Identified all fringe benefits provided to employees
- Gathered supporting documentation
- Calculated the taxable value of these benefits
- Checked if any exemptions or concessions apply
Keeping Proper Records: Always Your Best Defence
The ATO require detailed and accurate records to support your FBT reporting. Ensure you maintain:
- A list of all fringe benefits provided to employees
- Clear records of how the taxable value was calculated
- Any employee contributions, such as repayments towards the cost of a benefit
- Usage logs for cars, particularly if using the operating cost method
FBT and Company Cars: What’s Changed?
Company cars are one of the most common fringe benefits, and the ATO is increasing compliance checks in 2025.
The statutory formula method for calculating car fringe benefits is no longer available. The only option now is the operating cost method, which requires:
- Calculating total car operating costs, including fuel, insurance, repairs, and depreciation
- Determining the percentage of private versus business use
- Applying the private use percentage to total costs
- To use this method, a 12-week logbook must be kept to record business versus private use.
- Without a logbook, the entire operating cost may be subject to FBT.
Why Cars Are a Key FBT Focus in 2025
A car fringe benefit arises when an employer provides a car for an employee’s private use.
Private use includes driving the car outside of work hours or keeping it at home overnight.
The ATO is closely monitoring FBT compliance for company cars, particularly for fleet vehicles, workhorse vehicles, and hybrid or electric cars.
Other Important FBT Considerations
If the taxable value of certain fringe benefits exceeds $2,000, it must be reported on the employee’s income statement.
Some benefits may be exempt or concessional, including:
- Work-related items such as a laptop or phone used primarily for business
- Minor benefits, such as low-value, infrequent perks like a small gift or meal
Why FBT Compliance Matters
Managing FBT correctly is not just about avoiding penalties—it ensures that your business operates transparently, maintains strong financial records, and upholds fair workplace practices.
Many businesses accidentally trigger FBT liabilities by mixing personal and business expenses. The best way to stay compliant is to understand what counts as a fringe benefit, keep accurate records, and review FBT obligations before March 31 each year.
