Tax & ATO
Fringe Benefits Tax
Fringe Benefits Tax (FBT) is a tax employers pay on non-cash benefits given to employees or their associates, such as private use of a company car, entertainment or low-interest loans. It is charged at a flat 47% on the grossed-up value of benefits over an FBT year running 1 April to 31 March.
FBT is separate from income tax and is paid by the employer, not the employee. The FBT year runs 1 April to 31 March, out of step with the standard financial year, and the annual FBT return is due 21 May (later if lodged electronically through a tax agent). The rate is a flat 47% for the FBT years ending 31 March 2023 through 31 March 2027, matching the top marginal income tax rate plus Medicare levy so there is no advantage in paying staff with perks instead of salary.
The tax is not applied to the benefit's face value. The taxable value is grossed up to reflect the pre-tax salary an employee would have needed to buy the benefit themselves: by 2.0802 (type 1) where the employer can claim a GST credit on the benefit, or 1.8868 (type 2) where it cannot. Employers who paid more than $3,000 of FBT in the prior year pay quarterly FBT instalments through their activity statements. Full detail is on the ATO fringe benefits tax pages.
FBT catches things small-business owners rarely think of as taxable: the ute driven home each night if it is not a genuinely work-related exempt vehicle, Friday-night team dinners, Christmas parties over the minor-benefit limit, gym memberships, and phones or laptops that fail the primarily-work-use test. Because the 47% rate applies to a grossed-up value, the effective cost of a fringe benefit is close to double its price tag, which makes accidental FBT one of the more expensive compliance surprises around.
The main pressure valves are the exemptions and reductions. Minor benefits under $300 that are infrequent and irregular are exempt. Work-related items such as one portable electronic device per year, tools of trade and protective clothing are exempt. Employee contributions (the employee paying part of the cost from after-tax pay) reduce the taxable value dollar for dollar. Eligible electric vehicles under the luxury car tax threshold for fuel-efficient vehicles remain FBT-exempt, though plug-in hybrids lost that exemption from 1 April 2025 (existing binding arrangements aside). Keeping a logbook for vehicles and a register of entertainment spend is what turns FBT from a guess into a defensible number.
Suppose you pay a $2,000 (GST-inclusive) gym membership for an employee during the FBT year ending 31 March 2026. Your business can claim the GST credit, so it is a type 1 benefit. Grossed-up value: $2,000 x 2.0802 = $4,160.40. FBT payable: $4,160.40 x 47% = $1,955.39. That $2,000 perk actually costs about $3,955 before the deduction for the FBT itself.
| Item | FBT years ending 31 Mar 2026 and 2027 |
|---|---|
| FBT rate | 47% |
| Type 1 gross-up (GST credit claimable) | 2.0802 |
| Type 2 gross-up (no GST credit) | 1.8868 |
| FBT year | 1 April to 31 March |
| Return due | 21 May (extended for electronic tax-agent lodgement) |
| Minor benefits exemption | Under $300, infrequent and irregular |
Estimate a liability before you commit to a benefit with the OneBookPlus FBT calculator.
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Often not, if you keep it modest. A party costing less than $300 per employee, held infrequently, usually falls within the minor benefits exemption. Once the per-head cost reaches $300 or more, FBT can apply to the whole amount for employees and their partners, and the entertainment is generally not income-tax deductible either. Keep the per-head cost documented.
It can be. A single-cab ute, van or other eligible commercial vehicle is exempt when private use is limited to home-to-work travel and minor, infrequent private trips (the ATO's practical guideline uses limits such as no more than 1,000 km of private travel a year with no single return trip over 200 km). Dual-cab utes only qualify if they meet the load or passenger-carrying design tests.
Battery electric and hydrogen fuel-cell cars first held and used after 1 July 2022 remain FBT-exempt if their value is under the luxury car tax threshold for fuel-efficient vehicles. Plug-in hybrids lost the exemption from 1 April 2025 unless a pre-existing binding commitment carries them through. The benefit is still reportable, so it can affect an employee's HELP repayments and other income-tested obligations.
Last reviewed and updated: by Bishal Shrestha