Fringe Benefits Tax in Australia 2026: A Complete Employer Guide

Fringe Benefits Tax (FBT) is one of the most complex and frequently misunderstood areas of Australian tax law. For employers who provide non-cash benefits to their staff — from company cars and entertainment to laptops and salary sacrifice arrangements — understanding FBT obligations is essential to avoiding costly penalties and maximising legitimate concessions. With the 2025–26 FBT year now underway and significant changes to the electric vehicle exemption on the horizon, now is the time to review your position with a qualified accountant.

What Is Fringe Benefits Tax?

FBT is a tax paid by employers on non-cash benefits provided to employees or their associates in connection with employment. It is separate from income tax and is calculated on the grossed-up taxable value of the benefits provided. The FBT year runs from 1 April to 31 March — not the standard financial year — which catches many employers off guard.

For the 2025–26 FBT year, the FBT rate is 47% of the grossed-up taxable value. The gross-up rate depends on whether the employer can claim a GST input tax credit for the benefit: Type 1 benefits (GST-creditable) use a gross-up rate of 2.0802, while Type 2 benefits (non-GST-creditable) use 1.8868.

Importantly, FBT is an employer obligation — not an employee tax. Even if an employee receives a benefit, it is the employer who is liable to pay the FBT. This makes accurate record-keeping and proactive planning critical for any business that provides perks or benefits to its workforce.

Common Benefits Subject to FBT

A wide range of benefits can trigger FBT liability. Employers should review all non-cash benefits provided to employees and their associates, including:

• Private use of company cars — One of the most common FBT triggers, calculated using either the statutory formula method or the operating cost method
• Entertainment expenses — Client meals, staff functions, and social events can attract FBT depending on the circumstances
• Expense payments — Paying for an employee's private health insurance, school fees, or personal expenses
• Low-interest or interest-free loans — Loans provided at below-market rates create a taxable benefit
• Housing and living-away-from-home allowances — Particularly relevant for employees relocated for work
• Salary sacrifice arrangements — Including novated leases, superannuation top-ups, and other packaged benefits

Key FBT Exemptions and Concessions

Not all benefits attract FBT. Understanding the available exemptions and concessions is where a skilled accountant can deliver significant value for your business.

Minor Benefits Exemption

Benefits with a taxable value of less than $300 that are provided infrequently and irregularly are generally exempt from FBT. This exemption is commonly used for gifts, vouchers, and one-off perks. However, it cannot be used to exempt regular or recurring benefits, even if each individual benefit is below the threshold.

Work-Related Items Exemption

Portable electronic devices — such as laptops, tablets, and mobile phones — are exempt from FBT when provided primarily for work purposes. Importantly, only one device of each type per employee per FBT year is exempt (unless the device is a replacement). Protective clothing, tools of trade, and briefcases also qualify under this exemption.

Electric Vehicle FBT Exemption

One of the most significant FBT concessions in recent years is the exemption for eligible zero and low-emissions vehicles. For the 2025–26 FBT year, battery electric vehicles (BEVs) and hydrogen fuel cell vehicles first held and used on or after 1 July 2022, with a value below the luxury car tax threshold of $91,387, are exempt from FBT on private use.

Plug-in hybrid electric vehicles (PHEVs) ceased to qualify for the exemption from 1 April 2025, with limited exceptions for pre-existing financially binding commitments. Employers with PHEV arrangements should review their position carefully.

Looking ahead, the government has confirmed a three-phase restructure of the EV exemption:

1. Phase 1 (current to 31 March 2027) — Full FBT exemption continues under existing rules
2. Phase 2 (from 1 April 2027) — A $75,000 price cap is introduced; EVs priced between $75,000 and $91,387 receive only a 25% FBT discount
3. Phase 3 (from 1 April 2029) — The full exemption ends; all eligible EVs under the LCT threshold receive a 25% FBT discount only

Existing novated leases entered into before the relevant start dates are generally grandfathered under the old rules. Employers considering EV salary packaging arrangements should act before the Phase 2 changes take effect.

Employer Obligations and Compliance Requirements

Employers who provide fringe benefits must register for FBT with the ATO, even if they believe the benefits are exempt. Failing to register when required can result in penalties and interest charges.

The FBT return must be lodged and payment made by 21 May each year. Employers using a registered tax agent may receive an extended lodgement deadline of 25 June, but the payment deadline of 21 May remains unchanged regardless.

If the total taxable value of fringe benefits provided to an employee exceeds $2,000 in an FBT year, the employer must report the grossed-up amount as a Reportable Fringe Benefits Amount (RFBA) on the employee's income statement. This can affect the employee's eligibility for various government benefits and tax offsets, including the Medicare Levy Surcharge threshold and family payments.

Record-Keeping Requirements

Accurate records are essential for FBT compliance. For car benefits calculated using the operating cost method, employers must maintain a valid 12-week logbook for each vehicle. For EV home charging costs, employers can use actual electricity expenses or the ATO's EV home charging rate as set out in PCG 2024/2.

Australian Regulatory Context

FBT is governed by the Fringe Benefits Tax Assessment Act 1986 (FBTAA) and administered by the Australian Taxation Office (ATO). The ATO conducts regular compliance activities targeting employers who fail to register for FBT, underreport taxable benefits, or incorrectly apply exemptions.

Accountants advising on FBT must be registered with the Tax Practitioners Board (TPB) and comply with the Tax Agent Services Act 2009 (TASA). From 1 July 2025, expanded Code of Professional Conduct obligations require registered tax agents to maintain higher standards of transparency when advising on salary packaging and FBT arrangements.

The ATO's Taxation Ruling TR 2021/2 provides detailed guidance on the valuation of car fringe benefits, while PCG 2024/2 sets out the ATO's compliance approach to EV home charging costs. Employers should ensure their accountant is across these rulings when reviewing FBT positions.

Common FBT Mistakes to Avoid

FBT errors are among the most common issues identified in ATO employer audits. The following mistakes can result in significant back-tax liabilities, penalties, and interest:

• Failing to register for FBT — Required even if you believe all benefits are exempt
• Incorrectly applying the minor benefits exemption — The exemption does not apply to regular or recurring benefits
• Not maintaining logbooks for company cars — Without a valid logbook, the statutory formula method must be used, which may result in a higher FBT liability
• Overlooking RFBA reporting obligations — Failing to report RFBAs on employee income statements can create compliance issues for both employer and employee
• Assuming PHEV arrangements are still exempt — PHEVs lost their FBT exemption from 1 April 2025 (subject to limited transitional rules)
• Misclassifying entertainment expenses — The FBT treatment of entertainment depends on the type of entertainment, who attends, and the circumstances

Questions to Ask Your Accountant About FBT

If your business provides any non-cash benefits to employees, these are the key questions to raise with your accountant before the FBT year-end:

1. Are we registered for FBT, and do we need to lodge a return this year?
2. Which benefits we provide are taxable, and which qualify for exemptions?
3. Are our company car logbooks current and compliant with ATO requirements?
4. Do our EV salary packaging arrangements comply with the current exemption rules?
5. Are we correctly reporting Reportable Fringe Benefits Amounts on employee income statements?
6. Can we restructure any benefits to reduce our FBT liability without disadvantaging employees?
7. Are we prepared for the Phase 2 EV exemption changes from 1 April 2027?

How MyMoney® Can Help

FBT compliance requires specialist knowledge that goes beyond standard bookkeeping or tax return preparation. A qualified accountant with FBT expertise can help your business identify taxable benefits, apply the correct exemptions, maintain compliant records, and lodge accurate returns — saving you from costly ATO audits and penalties.

MyMoney® connects Australian employers with experienced, TPB-registered accountants who specialise in FBT, salary packaging, and employer tax obligations. Whether you need a one-off FBT review or ongoing compliance support, our marketplace makes it easy to find the right professional for your business.

Post a Brief to receive tailored proposals from qualified accountants who understand FBT, or Browse Accountants on the MyMoney® Marketplace to compare professionals and find the right fit for your business.