- FBT is paid by the employer, not the employee at a flat rate of 47% on the grossed-up taxable value of benefits provided.
- Not all benefits attract FBT. Exemptions including the minor benefits threshold of under $300 per occasion, work-related portable electronic devices, and eligible battery electric vehicles can significantly reduce liability but only when correctly documented and applied.
- FBT is self-assessed, employers are responsible for calculating their own liability, applying the correct gross-up rates, maintaining compliant records for five years, and lodging on time. Errors attract ATO penalties and audit risk.
Fringe benefits tax (FBT) is one of the more complex compliance obligations Australian employers face. With FBT charged at 47% and the ATO increasing scrutiny on employer reporting, even small mistakes can lead to unexpected tax liabilities and penalties.
What catches most businesses off guard is how broad the rules are, which benefits are taxable, what exemptions apply, how the FBT year works, and what changed in 2026. This is where a dedicated tax accountant makes a real difference, ensuring your liability is calculated correctly, exemptions are applied accurately, and your return is lodged on time.
This guide covers everything you need to know:
- What are fringe benefits tax (FBT)
- How FBT works
- How to calculate FBT
- Exemptions
Not all fringe benefits are grossed up the same way. If you can claim a GST credit on the benefit, it is a Type 1 benefit and uses the higher gross-up rate of 2.0802.
If no GST credit applies, it is a Type 2 benefit and uses the lower rate of 1.8868. Applying the wrong rate to the wrong benefit type is one of the most common FBT calculation errors employers make.
What is fringe benefits tax (FBT)?
Fringe Benefits Tax (FBT) is a tax employers pay on certain non-cash benefits provided to employees, directors, or their associates, such as family members. It is separate from income tax and is paid by the employer, not the employee.
FBT was introduced in Australia on 1 April 1986 to prevent employees from receiving untaxed benefits instead of taxable salary or wages. In simple terms, if a benefit provided by an employer has financial value, it may attract FBT.
The FBT year runs from 1 April to 31 March, which is separate from the standard income tax year. Currently, the FBT rate is 47%, aligned with the top marginal income tax rate including the Medicare levy.
What counts as a fringe benefit under FBT?
A fringe benefit is any benefit provided to a current, former, or future employee or their associate in connection with their employment, other than salary or wages.
Common examples include:
- Private use of a company car
- Car parking at or near the workplace
- Gym memberships paid by the business
- Reimbursement of personal expenses such as school fees or health insurance
- Entertainment including meals, events, or travel
- Low-interest or interest-free loans to employees
- Salary sacrifice arrangements involving non-cash benefits
- Living away from home allowances
- Expense payments for private purposes
The definition is intentionally broad. If your business pays for something that has a private benefit to an employee, FBT is likely in play, even if the primary purpose is work-related.
What benefits are exempt from fringe benefits tax?
Not everything provided to an employee triggers Fringe Benefits Tax. The following are excluded:
- Salary, wages, and allowances already subject to income tax
- Employer superannuation contributions to complying funds
- Shares or rights under approved employee share schemes
- Employment termination payments
- Payments treated as dividends under Division 7A
- Benefits provided to genuine independent contractors or volunteers
Who pays fringe benefits tax in Australia?
FBT is paid by the employer, not the employee. This is one of the most commonly misunderstood aspects of FBT and it changes how businesses should think about structuring employee benefits.
FBT applies when benefits are provided to:
- Current, former, or future employees
- Directors of a company
- Beneficiaries of a trust who perform work in the business
- Associates of employees, including family members
Sole traders and partners in a partnership are not employees for FBT purposes. Benefits you provide to yourself as a sole trader are not subject to FBT, they are treated differently under income tax rules.
Clients and customers are also outside the FBT regime. Entertainment provided to clients is not subject to FBT but may have income tax deductibility implications depending on the nature of the expense.
What are the FBT rates and thresholds for 2026?
Understanding current FBT rates and thresholds is essential for calculating taxable benefits, reporting obligations, and potential liabilities accurately.
What is the current FBT rate?
A flat FBT rate of 47% applies for the FBT year ending 31 March 2026. This rate has been consistent since the FBT year ending 31 March 2022 and is confirmed through to 31 March 2026.
The FBT year runs from 1 April to 31 March separate from the standard income tax year.
What are FBT gross-up rates?
FBT is not calculated on the face value of a benefit. It is calculated on the grossed-up taxable value, the pre-tax equivalent of what an employee would have needed to earn as salary to receive the same benefit after tax.
There are two gross-up rates depending on whether the employer can claim a GST credit on the benefit:
Type | When it applies | Gross-up rate | FBT rate | FBT year |
Type 1: higher gross-up rate | Employer is entitled to claim a GST credit on the benefit | 2.0802 | 47% | Ending 31 March 2023, 2024, 2025, 2026 and 2027 |
Type 2: lower gross-up rate | Employer is not entitled to claim GST credits | 1.8868 | 47% | Ending 31 March 2023, 2024, 2025, 2026 and 2027 |
When do fringe benefits become reportable?
If you provide certain fringe benefits with a total taxable value of more than $2,000 during the FBT year, you must report:
- the grossed-up taxable value of the fringe benefits on the employee’s income statement or payment summary
- for the corresponding income year.
Reportable fringe benefits are grossed-up using the lower gross-up rate. This is regardless of whether the benefits provided are type 1 or type 2.
For example, if an employee receives certain fringe benefits with a total taxable value of $2,000.01 for the FBT year ending 31 March 2026, the reportable fringe benefits amount is $3,773.
Threshold | FBT year ending 31 March 2026 |
Taxable value threshold for reporting | Exceeds $2,000 |
Minimum grossed-up reportable amount | $3,773 |
When do businesses need to pay FBT instalments?
If your FBT liability for the previous year was $3,000 or more, you are required to pay FBT in four quarterly instalments through your BAS in the following year rather than as a single annual payment.
What is the FBT record-keeping exemption threshold?
Employers whose FBT liability falls below the record-keeping exemption threshold may be eligible to use a simplified record-keeping approach for certain benefits.
FBT year-ending | Threshold |
31 March 2026 | $10,664 |
31 March 2025 | $10,334 |
31 March 2024 | $9,786 |
How are car fringe benefits calculated?
A flat statutory rate of 20% applies to all car fringe benefits provided from 1 April 2014, regardless of the distance travelled. The ATO provides a car fringe benefits calculator to help employers work out taxable value and FBT payable.
When does car parking attract FBT?
Car parking benefits are subject to FBT where the daily parking fee at a commercial car park exceeds the car parking threshold.
FBT year-ending | Car parking threshold |
31 March 2026 | $11.03 |
31 March 2025 | $10.77 |
What is the benchmark interest rate for FBT loans?
Used for calculating the taxable value of low-interest or interest-free loan benefits provided to employees.
FBT year-ending | Interest rate |
31 March 2026 | 8.62% |
31 March 2025 | 8.77% |
What is the EV home charging rate for FBT?
Employers with FBT obligations and individuals with work-related car expenses who meet the eligibility requirements can choose to calculate electricity costs when charging electric vehicles at an employee’s or individual’s home using the methodology outlined in Practical Compliance Guideline PCG 2024/2.
- The PCG provides that a revised EV home charging rate of 5.47 cents per kilometre can be used for the FBT year starting on 1 April 2026.
- For previous FBT years, the EV home charging rate was 4.20 cents per kilometre. You need to make sure you use the right rate for the right year.
FBT year-ending | EV home charging rate |
31 March 2027 | 5.47 cents per km |
31 March 2023, 2024, 2025 and 2026 | 4.20 cents per km |
If you choose not to use the method in the PCG, or you do not meet the eligibility requirements, you can determine the cost of the electricity by calculating its actual cost. The choice is per vehicle and applies for the whole income or FBT year.
FBT exemptions can significantly reduce your liability but only when correctly applied and documented. The minor benefits exemption, work-related device exemption, and EV exemption all have specific eligibility conditions. Claiming an exemption without the right records is treated by the ATO as a taxable benefit.
How do you calculate fringe benefits tax?
FBT is a self-assessed tax, which means employers are responsible for calculating their own fringe benefits tax liability each year.
To calculate the amount payable, employers must first determine the taxable value of any fringe benefits provided to employees. That value is then “grossed up” to reflect the equivalent pre-tax salary an employee would need to earn to receive the same benefit after tax.
The final FBT payable is calculated by applying the current FBT rate to the grossed-up taxable value of those benefits.
Employers must lodge their FBT return and pay any FBT owed by the relevant ATO deadline, which is generally 21 May each year.
Step-by-step guide to calculating FBT in Australia
For most Australian businesses, government entities, and non-exempt organisations, FBT is calculated using a gross-up formula designed to reflect the pre-tax salary an employee would need to earn to receive the same benefit after tax.
The calculation process generally works as follows:
Step 1: Calculate the taxable value of each fringe benefit
Start by determining the taxable value of every fringe benefit provided to employees during the FBT year.
- The calculation method depends on the type of benefit involved, such as car benefits, entertainment, expense reimbursements, or loan benefits.
- If GST was included in the cost of providing the benefit, this also affects how the benefit is treated for FBT purposes.
Step 2: Separate Type 1 and Type 2 benefits
Fringe benefits are divided into two categories:
- benefits where the employer is entitled to claim GST input tax credits (Type 1 benefits), and
- benefits where no GST input tax credits can be claimed (Type 2 benefits).
This distinction determines which gross-up rate applies.
Read more:
- How to Register for GST in Australia
- How to Calculate GST in Australia: Formulas, Examples and the 1/11 Rule Explained
Step 3: Apply the correct gross-up rates
For the current financial FBT year:
- the Type 1 gross-up rate is 2.0802, and
- the Type 2 gross-up rate is 1.8868.
These gross-up rates increase the taxable value of the benefit to its equivalent pre-tax salary value before FBT is applied.
Step 4: Calculate the total taxable amount
Once the gross-up rates are applied, the adjusted benefit values are combined to determine the total fringe benefits taxable amount.
Step 5: Apply the FBT rate
The final FBT payable is calculated by applying the current FBT rate of 47% to the total grossed-up taxable amount.
Example of how FBT is calculated
Assume a business provides:
- company car benefits,
- restaurant meals, and
- school fee payments for employees.
Benefits where GST credits can be claimed are calculated using the Type 1 gross-up rate, while GST-free or input-taxed benefits use the Type 2 rate.
- After grossing up both categories and combining the totals, the employer applies the 47% FBT rate to determine the final amount payable to the ATO.
- Because FBT calculations can become complex quickly, especially where multiple benefit types, exemptions, employee contributions, or GST treatments are involved, many businesses work with a tax accountant to ensure the calculations are accurate and compliant.
How does Fringe Benefits Tax work for exempt and rebatable not-for-profit organisations?
FBT rules work differently for certain not-for-profit organisations that qualify for FBT exemptions or FBT rebates.
Eligible organisations may receive:
- full FBT exemptions up to specific capping thresholds, or
- partial FBT rebates that reduce the amount of FBT payable.
This treatment applies because qualifying not-for-profit employers are subject to special concession rules under the FBT system.
However, exemptions and rebates are not unlimited.
- Once employee benefit amounts exceed the relevant capping thresholds, FBT may still apply to the excess amount.
- Because the concession calculations can become complex, particularly where multiple employees, salary packaging arrangements, or different benefit types are involved.
- Many not-for-profit organisations use specialised FBT calculators or work with a tax accountant to ensure benefits are structured correctly and reported accurately.
Read more: Tax Accountant vs Tax Agent: Which One Should You Choose for Your Business?
Common FBT exemptions employers should know
Not every employee benefit automatically attracts Fringe Benefits Tax. Australian FBT rules include several exemptions and concessions that can significantly reduce an employer’s FBT liability when applied correctly.
1. Minor benefits exemption
Benefits with a value of less than $300 may qualify for the minor benefits exemption if they are provided infrequently and irregularly.
This exemption commonly applies to occasional gifts, staff celebrations, or small employee perks. However, employers must also consider how often similar benefits are provided throughout the FBT year.
2. Work-related portable electronic devices
Certain work-related devices provided primarily for business use are exempt from FBT, including:
- laptops,
- mobile phones,
- tablets, and
- portable printers.
The exemption generally applies where the device is primarily used for work purposes.
3. Otherwise deductible rule
A benefit may be reduced or fully exempt from FBT where the employee would have been entitled to claim an income tax deduction had they paid for the expense personally.
This commonly applies to:
- work-related travel,
- professional subscriptions,
- self-education expenses, and
- certain tools or equipment used for work.
Employers must maintain appropriate documentation to apply the otherwise deductible rule correctly.
4. Electric vehicle exemption
Eligible electric vehicles may qualify for an FBT exemption if:
- the vehicle is a battery electric, hydrogen fuel cell, or eligible plug-in hybrid vehicle under transitional rules,
- the car was first held and used on or after 1 July 2022, and
- luxury car tax was not payable on the vehicle when first purchased.
However, from 1 April 2025, plug-in hybrid electric vehicles (PHEVs) generally no longer qualify for the exemption unless transitional arrangements apply.
5. Exempt work-related travel
Certain travel expenses may be exempt where the travel is primarily work-related and adequately substantiated with travel records, employee declarations, and supporting documentation.
6. Remote area concessions
Specific concessions and exemptions may apply to businesses operating in eligible remote areas, including benefits relating to:
- housing,
- relocation,
- residential fuel, and
- remote area holiday transport.
These exemptions are subject to strict eligibility rules and geographical definitions under FBT legislation.
7. Car parking exemptions
Some car parking benefits may be exempt from FBT, particularly for:
- small businesses in certain circumstances,
- parking provided at non-commercial locations, or
- situations where the commercial parking threshold is not exceeded.
Because exemption eligibility depends heavily on documentation, usage patterns, and how benefits are structured, many employers work with a tax accountant to ensure exemptions are applied correctly and supported appropriately during an ATO review or audit.
When is FBT due in Australia? Registration, lodgement and payment deadlines for 2026
Businesses that provide taxable fringe benefits to employees may need to register for FBT and meet separate lodgement and payment deadlines each year.
When do businesses need to register for FBT?
If you have provided fringe benefits during the FBT year, you must register for FBT with the ATO. You can register:
- Online via the ATO business portal (requires an ABN)
- By phone
- By mail using a paper form
- Through a registered tax agent
What are the FBT lodgement and payment deadlines for 2026?
For the FBT year ending 31 March 2026:
Lodgement method | Due date |
Self-lodged | 21 May 2026 |
Lodged through a registered tax agent electronically | 25 June 2026 |
Both lodgement and payment of any FBT liability are due on the same date.
Important: To access the extended 25 June deadline through a tax agent, you must be added to the agent’s FBT client list before 21 May 2026. Switching agents or engaging one for the first time after that date means you lose access to the extension.
When do quarterly FBT instalments apply?
If your FBT liability for the previous year was $3,000 or more, you are required to pay FBT in quarterly instalments through your BAS in the following year rather than as a single annual payment. Your annual FBT return then reconciles actual liability against instalments paid.
What happens if you have no FBT liability?
If you are registered for FBT but have no liability for the year and no benefits were provided, you do not need to lodge a return but you must submit a Fringe Benefits Tax Notice of Non-Lodgement to prevent the ATO from pursuing a return at a later date.
Is fringe benefits tax deductible?
Yes. Employers who pay FBT can generally claim the following:
- An income tax deduction on the cost of providing the fringe benefits
- An income tax deduction on the FBT amount itself
- GST credits on fringe benefit expenses where GST credits apply
For Type 1 benefits where GST credits apply, the deduction is based on the GST-exclusive amount. For Type 2 benefits where no GST credit is available, the full cost is deductible.
Accurate record-keeping is essential for claiming these deductions correctly. The ATO can and does audit FBT records, particularly where deductions have been claimed on benefits that should have been exempt or where GST treatment is inconsistent.
What records do employers need to keep for FBT?
Employers must keep records that show how the taxable value of each benefit was calculated and support any FBT exemptions or concessions claimed. All records must be in English and, if stored electronically, in a format readily accessible to the ATO.
You do not need to submit records with your FBT return but you must produce them if the ATO requests them.
Records you need to keep
- Calculations and worksheets
- Employee declarations
- Invoices, receipts, and bills of sale
- Lease documents and travel diaries
- Logbooks and odometer records
For entertainment benefits, also record the date, recipient, cost, type, and location of entertainment provided.
Records to obtain from employees
Some exemptions require signed declarations, invoices, receipts, logbooks, and travel diaries directly from employees. Failing to obtain these before lodging your return can invalidate an otherwise valid exemption claim.
Alternative record-keeping option
Employers can use existing business records in place of certain employee declarations for eligible benefits, where the ATO has made a determination covering those records. This does not apply to all benefit types, check ATO guidance before relying on this option.
How long to keep records
Keep all FBT records for five years from the date you lodge your FBT return. If no return is required, keep records for five years from the lodgement due date of 21 May.
The record-keeping exemption threshold for the FBT year ending 31 March 2026 is $10,664. Employers below this threshold may be eligible to use a simplified record-keeping approach.
If you have provided fringe benefits during the FBT year, you must register for FBT with the ATO before lodging. You can register online via the ATO business portal, by phone, by mail, or through a registered tax agent.
Common fringe benefits tax mistakes employers make
Even experienced employers make costly FBT errors. These are the most common:
- Claiming the PHEV exemption for new arrangements entered after 1 April 2025. The exemption ended on that date. New PHEV arrangements are fully subject to FBT.
- Including FBT-exempt EVs without checking the LCT threshold. If luxury car tax has ever been payable on the vehicle, the FBT exemption does not apply even if the vehicle’s current value is below the threshold.
- Treating the minor benefits exemption as a cumulative annual limit. The $300 threshold applies per benefit, but employers must also consider factors such as how frequently similar benefits are provided throughout the year when determining whether the exemption applies.
- Missing the RFBA reporting requirement. Failing to report reportable fringe benefits amounts (RFBAs) correctly can result in ATO penalties and increased compliance scrutiny.
- Misclassifying entertainment as work-related. Meal entertainment is one of the highest-scrutiny areas in FBT. The ATO applies detailed rules around what constitutes work-related entertainment versus private entertainment.
- Not registering for FBT at all. Some employers provide fringe benefits without realising they have an FBT obligation. Company vehicles available for private use, reimbursed personal expenses, and employer-paid health insurance are all common triggers that go unregistered.
- Insufficient records to support exemptions claimed. Records are what separate a legitimate exemption from a taxable benefit. If you cannot substantiate a claim, the ATO will treat the benefit as taxable.
How Sleek can help as a tax accountant
Running a business in Australia comes with a growing list of tax and compliance obligations. Having the right support in place from day one makes all the difference.
Here’s how Sleek can help:
- Dedicated CA/CPA tax accountant: Work with a qualified, experienced tax accountant who understands your business, handling tax returns, BAS, tax planning, and ATO compliance so you can focus on running your business.
- Ongoing compliance support: From payroll and bookkeeping to ASIC obligations and annual reviews, all your compliance needs are managed in one platform, no juggling multiple providers, no missed deadlines.
- All-Inclusive transparent pricing: Sleek’s tax accountant services with clear, upfront pricing with no hidden fees or surprise add-ons.
Book a free consultation with Sleek and find out how a dedicated tax accountant can take compliance off your plate entirely.
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Frequently Asked Questions
What is the FBT rate in Australia for 2026?
The FBT rate for the year ending 31 March 2026 is 47%, consistent with the top marginal income tax rate plus the Medicare levy.
Do I need to lodge an FBT return if I have no liability?
If you provided no fringe benefits during the FBT year and have no FBT liability, you generally do not need to lodge a return. However if you are registered for FBT, you must submit a Notice of Non-Lodgement by the lodgement due date to prevent the ATO from pursuing a return at a later date.
Does FBT apply to sole traders?
No. Sole traders and partners in a partnership are not employees for FBT purposes. Benefits provided to yourself as a sole trader are not subject to FBT, they are treated under income tax rules instead.
