FBT is the tax your business pays when you give staff something other than salary. A car they drive on weekends, a gym membership, the dinner that went on the company card, an interest-free loan. The employee does not pay tax on it. You do.
The whole point of FBT is to close a gap. Without it, a business could pay someone $80,000 in salary plus a $20,000 car for private use, and that $20,000 would slip through untaxed. FBT taxes the perk at roughly the rate the employee would have paid if you had just handed them the cash. So the trick of dressing up wages as benefits stops working.
A few things make FBT its own animal. It is a separate tax, with its own return, and its own year. The FBT year runs 1 April to 31 March, not the 1 July to 30 June you use for income tax. That mismatch on its own catches people out.
When does FBT apply?
You are in FBT territory the moment you give an employee, or their family, a non-cash benefit tied to the job. The usual suspects:
- a company car that is available for private use
- paying an employee’s private expense, like their phone bill, rent or school fees
- entertainment: restaurant meals, event tickets, the staff party
- a gym membership or club fees
- a loan at no interest, or below the benchmark rate
- car parking near a commercial car park
Salary is not a fringe benefit. Super is not. Genuine work tools mostly are not. It is the extras sitting on top of the pay packet that pull you in.
How the tax is worked out
Here is the mechanic, and it is where most people’s eyes glaze over, so we will keep it short. You take the taxable value of the benefit. You gross it up. You multiply by 47%.
Grossing up is the part that feels strange. The benefit gets scaled up to the pre-tax salary an employee on the top rate would have needed to buy it themselves. A $1,000 perk is not taxed on $1,000. It is taxed on what $1,000 in the hand is worth in gross wages. That is why the rates look odd: 2.0802 or 1.8868.
Which one applies depends on GST. If your business could claim a GST credit on the benefit, most cars and most entertainment, it is Type 1 and grosses up at 2.0802. If no GST credit was available, like residential rent or GST-free items, it is Type 2 at 1.8868.
Figure 1. The FBT calculation, worked on a $1,000 Type 1 benefit.
Run that example all the way through and a $1,000 Type 1 benefit grosses up to $2,080.20, with FBT at 47% landing at $977.69. Close to the value of the benefit itself. FBT is not cheap, which is exactly why it does its job. Employee contributions toward the benefit reduce the taxable value, and the FBT with it.
The exemptions worth knowing
Plenty of benefits are exempt. These are the ones that actually come up:
- Minor benefits under $300. Less than $300, given infrequently and irregularly, is usually exempt. The occasional gift card, the one-off lunch.
- Work-related items. A laptop, phone or tablet provided mainly for work is exempt, even with some private use.
- Eligible electric cars. A battery or fuel-cell EV first held from 1 July 2022 and priced under the fuel-efficient luxury car threshold ($91,387 for 2025-26) is FBT-exempt. Plug-in hybrids lost that exemption from 1 April 2025.
One catch on the EV. No FBT is payable, but the grossed-up value still shows up as a reportable benefit on the employee’s income statement. Exempt from the tax, not from the reporting.
What employees see: reportable fringe benefits
This is the part employees do not expect. If the benefits you give one person add up to more than $2,000 in taxable value for the year, you report the grossed-up figure on their income statement. They pay no income tax on it. But it counts toward the Medicare levy surcharge, study loan repayments and child support. A generous salary-packaging arrangement can quietly lift someone’s repayments elsewhere, so it is worth a conversation before you set it up. Track the numbers as you go with tools like HPLedger.
Key dates
The FBT return is due 21 May for the year that ended 31 March. Lodge through a registered tax agent and you generally have until 25 June. If your FBT bill last year was $3,000 or more, you pay in quarterly instalments through your activity statement rather than in one hit. Late lodgment carries a failure-to-lodge penalty charged in penalty units, so it is not a deadline to let slide.
Figure 2. The FBT year and the income tax year do not line up.
What trips people up
Three things, every year. The FBT year ending in March, not June. The staff Christmas party, which can be exempt or taxable depending on cost per head and how you treat it. And the quiet assumption that a small perk is too small to matter. FBT has no “she’ll be right” threshold; it has specific exemptions, and if the benefit does not fit one, it is taxable. If you are packaging benefits or running cars through the business, have a registered tax agent map the FBT before you commit, which is the kind of check Tax Assistant is built for. Keep the logbooks and declarations as you go, because FBT records must be kept 5 years like the rest. Cars, parking and entertainment are where the ATO looks hardest.
Common benefits and how FBT treats them
Benefit | FBT? | What it is |
Company car used privately | Taxable | Car fringe benefit. Value by statutory 20% or operating cost method. |
Eligible electric car under $91,387 | Exempt | BEV/FCEV first held from 1 Jul 2022. Still reportable on the payslip. |
Laptop or phone, mainly for work | Exempt | Work-related portable item. Some private use is fine. |
Gift or lunch under $300, one-off | Exempt | Minor benefit, if infrequent and irregular. |
Staff Christmas party | Depends | Cost per head and the method you choose decide it. |
Paying an employee’s private bill | Taxable | Expense payment benefit. Rent, school fees, personal phone. |
Interest-free or cheap loan | Taxable | Loan fringe benefit, measured against the benchmark rate. |
Car parking near a commercial park | Taxable | Car parking fringe benefit, where conditions are met. |
“Depends” means the outcome turns on the detail. Get those benefits checked rather than assumed.
Technical reference (current to June 2026)
Legislative basis: Fringe Benefits Tax Assessment Act 1986 (Cth); tax imposed by the Fringe Benefits Tax Act 1986 (Cth). Administered by the ATO separately from income tax.
Rate, year and gross-up
FBT year: 1 April to 31 March. FBT rate: 47% for the FBT years ending 31 March 2023 through 31 March 2027 (equal to the 45% top marginal rate plus the 2% Medicare levy).
Gross-up rates (unchanged for the FBT years ending 31 March 2025 and 31 March 2026, and the 2026-27 year): Type 1 (benefit provider entitled to a GST credit) 2.0802; Type 2 (no GST credit) 1.8868.
FBT formula: FBT = (total Type 1 taxable values x 2.0802 + total Type 2 taxable values x 1.8868) x 47%. Employee contributions reduce the taxable value.
Reportable fringe benefits
Where an individual employee’s benefits exceed $2,000 in taxable value for the FBT year, the grossed-up amount (using the lower 1.8868 rate regardless of benefit type) is a Reportable Fringe Benefits Amount on the income statement. Example: $2,000.01 grosses up to $3,773. The RFBA is not subject to income tax but is counted for the Medicare levy surcharge, Division 293, study and training loan repayments, and child support.
Common exemptions
Minor benefits: notional taxable value under $300, provided infrequently and irregularly (s 58P). Work-related portable electronic devices and similar items used primarily for work (s 58X). Eligible zero or low-emissions vehicles (battery electric and hydrogen fuel-cell) first held and used from 1 July 2022, with value at first retail sale below the fuel-efficient luxury car tax threshold ($91,387 for 2025-26); plug-in hybrids excluded from 1 April 2025 unless a pre-existing binding commitment applies. An exempt EV benefit still counts toward the employee’s RFBA.
Cars
Car fringe benefits valued under the statutory formula (flat 20% of base value, from 1 April 2014) or the operating cost method (business-use percentage of total costs, logbook required). The employer elects per car, per FBT year.
Lodgment, payment and instalments
FBT return and payment due 21 May for the FBT year ended on the preceding 31 March. Registered tax agents lodging electronically generally have until 25 June, where appointed to the client’s FBT role by 21 May. Where the prior-year FBT liability was $3,000 or more, FBT is paid by 4 quarterly instalments reported on the activity statement (due 28 July, 28 October, 28 February and 28 April). Late lodgment attracts a failure-to-lodge penalty. FBT records must be kept for 5 years.
Figures are current to June 2026 and refer to the FBT year ending 31 March 2026 unless stated. Rates and thresholds are set by the ATO and can change; confirm the current year’s figures before lodging. This article is general information, not personal tax advice.
