Fringe Benefits Tax (FBT): What Australian Employers Need to Know in 2025–26

Fringe benefits tax (FBT) is one of those topics that gets pushed to the bottom of the pile, until the ATO comes knocking. Most of our clients either forget about it, underestimate it, or aren’t sure if it applies to them at all. So here’s a plain-English breakdown of FBT meaning, how it’s calculated, what counts as a fringe benefit, and what’s changed in 2025–26 that you genuinely need to know about.

For Future Advisory clients: We make FBT as straightforward as possible for our clients. In March each year, we’ll send you an FBT questionnaire to complete. Return it by 30 April and we handle everything from there, calculation, return preparation, and lodgment by the extended 25 June deadline. No separate registration step needed. If you’re not yet a client and want help with FBT, get in touch here.

Key Highlights

• Fringe benefits tax meaning: FBT is a tax paid by employers on non-cash benefits provided to employees or their associates, separate to income tax.
• FBT rate 2025–26: 47%, unchanged. Gross-up rates are 2.0802 (Type 1, GST-creditable) and 1.8868 (Type 2, non-GST-creditable).
• FBT year: 1 April to 31 March, not the standard income tax year.
• FBT return due date 2026: 21 May 2026 if self-lodging; 25 June 2026 if lodging through a registered tax agent (agent must be appointed by 21 May).
• Big 2025–26 change: Plug-in hybrid electric vehicles (PHEVs) lost their FBT exemption from 1 April 2025. Fully electric and hydrogen vehicles remain exempt.
• ATO compliance focus: The ATO estimates it collects only around 65% of the FBT it should, audits are increasing, especially for car benefits, entertainment, and nil lodgments.

What Is Fringe Benefits Tax?

Fringe benefits tax (FBT) is a tax paid by employers on certain non-cash benefits they provide to employees, or to an employee’s family or associates. It is separate from income tax and is calculated on the taxable value of the benefit, not the employee’s income. The employer pays FBT, even if the benefit is provided by a third party on the employer’s behalf.

For FBT accounting purposes, the FBT year runs from 1 April to 31 March each year, different to the standard 30 June income tax year. Employers must self-assess their FBT liability, lodge an FBT return, and pay any amount owing.

Simple definition: If you give an employee something of value that isn’t salary or wages, a company car they use on weekends, a gym membership, tickets to the footy, there’s a good chance FBT applies. You pay the tax, not them.

Fringe Benefits Meaning: What Counts as a Fringe Benefit?

A fringe benefit is any non-cash benefit provided to an employee (or their associate) in addition to, or instead of, their salary or wages. The term covers a wide range of perks, from the obvious to the easily overlooked.

This includes directors who own their business and aren’t necessarily paid a wage, FBT can still apply to benefits they receive.

Examples of Fringe Benefits

Here are the most common examples of fringe benefits that trigger an FBT obligation in Australia:

• A work car used for private purposes (e.g. driving to school drop-off or the weekend shops)
• Employer-provided car parking
• Paying an employee’s gym membership
• Private health insurance as part of a remuneration package
• Giving an employee a low-interest or interest-free loan
• Meal entertainment, client dinners, team lunches, function tickets
• Tickets to sporting events or concerts
• Reimbursing personal expenses such as school fees
• Benefits provided under a salary sacrifice arrangement
• Living-away-from-home allowances

What Is NOT a Fringe Benefit?

Not everything non-cash qualifies. The following are not subject to FBT:

• Salary and wages
• Employer super contributions to a complying fund
• Shares or rights provided under approved employee share schemes
• Employment termination payments
• Benefits provided to volunteers or contractors
• Exempt benefits, such as eligible work-related items (laptops, phones, tools) used primarily for work, and minor benefits under $300 provided infrequently

FBT Registration: Who Needs to Register?

Any business that employs people and provides fringe benefits must register for FBT with the ATO. FBT registration is done through the ATO’s Business Portal or via your tax agent.

At Future Advisory, we are now registering all clients who have employees for FBT, unless you contact us to let us know otherwise. Even if you don’t think you’ve provided any fringe benefits this year, it’s worth registering. Here’s why.

How Is Fringe Benefits Tax Calculated?

The fringe benefits tax calculation works by “grossing up” the taxable value of the benefit, converting it to a pre-tax equivalent at the top marginal rate, and then applying the 47% FBT rate. There are two gross-up rates:

FBT calculation formula: Taxable Value × Gross-Up Rate × 47% = FBT payable

Example, gym membership: An employer pays $1,100 (GST-inclusive) for an employee’s gym membership.

$1,100 × 2.0802 (Type 1) × 47% = $1,075.46 FBT payable

The good news: the employer can also claim an income tax deduction and GST credit for the gym membership cost, plus a deduction for the FBT paid.

The amount formula varies depending on the type of benefit, cars are calculated differently to entertainment, which is different again to loans. Your accountant handles the correct formula for each category as part of your FBT return preparation.

FBT Return: What You Need to Lodge and When

You must lodge an FBT return if, for the FBT year (1 April to 31 March), you had FBT payable on benefits provided to employees, or you paid FBT instalments through your activity statements.

If your FBT liability was $3,000 or more in the prior year, you’ll need to pay quarterly instalments, these are included in your activity statements throughout the year, with any remaining balance settled at return time.

There’s a Good Reason to Lodge an FBT Return Even If It’s Nil

You might be thinking: “I can’t think of any fringe benefits this year, so I don’t need to lodge, right?” Not so fast. Here’s why lodging a nil FBT return is still a smart move:

• It triggers a two-year time limit for the ATO to review your FBT position, if they don’t review within two years of lodgment, they generally can’t come back further
• Personal vs. business use is subjective, and lodging protects you against an audit interpreting things differently in a later year
• It protects against honest mistakes, forgotten logbooks, overlooked benefits, that are far easier to manage within a defined review window
• If you’re registered for FBT but don’t need to lodge, you must still send the ATO a Fringe Benefits Tax – Notice of Non-Lodgment (NAT 3094) to avoid the ATO chasing a return later

What Happens If You Get Audited for FBT?

If you’re being audited, you’ll have an opportunity to disclose any mistakes. If you put your hand up and let the ATO know about an error, in most cases there won’t be fines or penalties for voluntary disclosure. But if you don’t disclose and the ATO finds it themselves, penalties may apply.

⚠️ ATO compliance alert 2025–26: The ATO estimates it only collects around 65% of the FBT it should receive. As a result, it has ramped up targeted audits, particularly focusing on: car fringe benefits and logbook compliance; entertainment and meal expense classification; electric vehicle exemption eligibility; salary packaging arrangements; and businesses registered for FBT that lodge nil returns without adequate records.

What’s Changed with FBT in 2025–26?

The FBT rate stays at 47% for the 2025–26 year, no change there. But several important practical changes kicked in from 1 April 2025 that affect many employers.

Plug-In Hybrid Electric Vehicles (PHEVs) Are No Longer Exempt

From 1 April 2025, plug-in hybrid electric vehicles (PHEVs) are no longer eligible for the FBT electric car exemption. If your business provided a PHEV to an employee under a new arrangement after this date, FBT applies. There are narrow transitional rules: if the vehicle was available for use before 1 April 2025, and there was a financially binding commitment to continue providing it before that date, the exemption may still apply, provided the arrangement hasn’t been varied, extended, or refinanced since. Any change to the arrangement causes the exemption to cease.

Fully electric vehicles (BEVs) and hydrogen fuel cell vehicles remain exempt from FBT, provided the car’s value is under the luxury car tax threshold ($91,387 for 2025–26). Note: exempt EVs may still create a reportable fringe benefits amount, employers still need to track and report the notional value. The EV home charging rate for the FBT year starting 1 April 2026 is 5.47 cents per kilometre (up from 4.20 cents per kilometre for prior years).

Alternative Record-Keeping Rules Now Firmly in Place

From 1 April 2024, employers can use existing business records instead of traditional employee declarations and travel diaries for certain benefit types. For the 2025–26 FBT year, the ATO is now actively checking the quality of these alternative records in audits, so make sure yours are thorough and well-organised.

Car Parking FBT, Wider Interpretation

The ATO has widened its definition of what counts as a “commercial car parking station” for FBT purposes, including shopping centre car parks. If your business provides parking within one kilometre of a commercial parking facility, you may now have an FBT liability where you didn’t before. Review your arrangements.

FBT Record-Keeping Exemption Threshold

The record-keeping exemption threshold for 2025–26 has increased to $10,664. Employers with aggregate FBT below this threshold may not need to maintain certain records, but check with your accountant before relying on this.

What Do Employers Need to Do for FBT?

For any employer providing fringe benefits, the FBT obligations are the same regardless of who prepares your return:

• Keep records of all non-cash benefits provided to employees throughout the FBT year (1 April to 31 March)
• Maintain vehicle logbooks for any cars provided for private use, this is the single most common area of FBT scrutiny
• Review salary packaging arrangements and any benefits provided under sacrifice agreements
• Lodge an FBT return (or a Notice of Non-Lodgment) by the relevant due date, 21 May if self-lodging, 25 June if lodging through a registered agent
• If PHEVs are provided to employees, review whether the transitional exemption conditions still apply from 1 April 2025

For Future Advisory clients, how we handle FBT on your behalf. We make this as straightforward as possible:

• In March, we’ll send you an FBT questionnaire, keep an eye on your inbox
• Complete and return the form by 30 April so we have everything we need
• We calculate your liability, prepare your return, and lodge by the extended 25 June 2026 deadline under our registered tax agent status
• Lodging through Future Advisory automatically registers you for FBT, no separate step needed on your end

If we have any questions after reviewing your form, we’ll reach out directly.

Frequently Asked Questions About Fringe Benefits Tax

The questions we hear most from business owners and employers, answered in plain English.

What is fringe benefit tax?

Fringe benefits tax (FBT) is a tax paid by employers on non-cash benefits provided to their employees, or to the employees’ family or associates. It is separate from income tax and is calculated on the taxable value of the benefit, grossed up to reflect the pre-tax equivalent. The employer pays FBT, not the employee, at a rate of 47%.

What does “fringe benefits” mean?

Fringe benefits are non-cash perks provided to an employee on top of (or instead of) their salary or wages. Common examples include a company car for private use, employer-paid gym membership, car parking, entertainment, low-interest loans, and private health insurance contributions. If it has a monetary value and it’s not salary, it’s likely a fringe benefit.

What are some examples of fringe benefits in Australia?

Common examples include: a work car used for private driving; employer-paid gym membership; tickets to sporting events or concerts; meal entertainment; school fee reimbursements; low-interest or interest-free loans; private health insurance; car parking; and benefits provided under salary sacrifice arrangements. Minor benefits, those under $300 provided infrequently, are generally exempt.

How is fringe benefits tax calculated?

The FBT calculation formula is: Taxable Value × Gross-Up Rate × 47% = FBT payable. The gross-up rate is 2.0802 for GST-creditable benefits (Type 1) and 1.8868 for non-GST-creditable benefits (Type 2). For example, a $1,100 GST-inclusive gym membership results in FBT of approximately $1,075.46. Different benefit categories (cars, loans, entertainment) use different valuation methods, so the formula varies.

Who needs to register for FBT?

Any employer who provides fringe benefits to employees must register for FBT with the ATO. This includes directors of companies who receive benefits as part of their role. Sole traders and partners in a partnership are not employees for FBT purposes, so benefits they provide to themselves are not subject to FBT. At Future Advisory, we register all clients with employees for FBT as a default, it’s the safest approach.

When is the FBT return due?

The FBT year ends on 31 March. For the 2025–26 FBT year (ending 31 March 2026), the self-lodgment due date is 21 May 2026. Employers lodging through a registered tax agent have until 25 June 2026, provided the agent is appointed by 21 May 2026. Future Advisory clients benefit from this extended deadline automatically.

Do I need to lodge an FBT return if my liability is nil?

Not always required, but strongly recommended. Lodging a nil FBT return triggers a two-year review window for the ATO, after which they generally cannot audit your FBT position for that year. If you’re registered for FBT and choose not to lodge, you must submit a Notice of Non-Lodgment (NAT 3094). Lodging a nil return provides much better audit protection and is what we recommend for all clients with employees.

Are electric vehicles exempt from FBT?

Battery electric vehicles (BEVs) and hydrogen fuel cell vehicles are still exempt from FBT in 2025–26, provided the vehicle’s value is below the luxury car tax threshold ($91,387 for 2025–26). However, from 1 April 2025, plug-in hybrid electric vehicles (PHEVs) lost their FBT exemption, except under limited transitional conditions. Note that even exempt electric vehicles may create reportable fringe benefit amounts, so employers still need to track and report their value.

Can I reduce my FBT liability?

Yes, there are several legitimate ways to reduce FBT. Employee contributions toward the cost of a benefit reduce its taxable value. Salary packaging can shift benefits into categories eligible for concessions or exemptions. Providing work-related items (laptops, phones, tools) primarily for work use may attract an exemption. Maintaining accurate logbooks for vehicles is one of the most effective ways to reduce car FBT. A good accountant can review your specific benefits and identify where concessions apply.

What does FBT accounting involve?

FBT accounting involves identifying all fringe benefits provided during the FBT year, valuing them using the correct ATO-approved method for each benefit type, calculating the grossed-up FBT liability, preparing and lodging the FBT return, and reporting any reportable fringe benefits amounts on employee payment summaries (for benefits with a grossed-up value over $2,000). At Future Advisory, we handle all of this, the questionnaire you fill out in March is the starting point. We take it from there.

FBT can be surprisingly wide-reaching, and the ATO is watching more closely than ever. If you’re unsure whether a benefit you’re providing triggers an FBT obligation, or you want to review your salary packaging, vehicle arrangements, or entertainment spend before 31 March, get in touch with the Future Advisory team for a plain-English conversation. We work across Tax & Accounting, Xero Accounting, Mortgage Broking, Financial Planning, Business Advisory, and we’ve got offices in Cremorne, Narre Warren, Melbourne CBD, and the Sunshine Coast.