What You Need to Know About Fringe Benefits Tax in 2025

Fringe Benefits Tax (FBT) is one of those terms that often leaves people scratching their heads. FBT 2025 guide: 47% FBT rate, grossed up & gross-up rates (Type 1 & 2), FBT interest rate 2025 (benchmark/deemed), benefits, exemptions and compliance tips. Fringe Benefits Tax seems to be one of those accounting terms that never stick. If we had a dollar for “What is FBT again?”, we’d be retiring early 😉

FBT is a tax that employers pay on certain benefits provided to employees in place of salary or wages. Understanding fringe benefits tax 2025 changes and the compliance requirements for the 2025-26 FBT year means that you (or we) can minimise your tax liability and avoid penalties.

Key FBT Considerations for 2026

1. FBT Rates and Thresholds

The FBT rate for the 2025-26 FBT year remains at 47%, in line with the top marginal income tax rate. The gross-up rates also remain unchanged:

• Type 1 (GST creditable benefits): 2.0802
• Type 2 (non-GST creditable benefits): 1.8868

Employers should use these rates when calculating their FBT liability.

For example, if an employer provides a GST-inclusive benefit worth $1000, the taxable value for FBT purposes would be $1,000 × 2.0802 = $2,080.20. The employer then applies the FBT rate of 47% to this amount to determine the final FBT payable.

2. Common Fringe Benefits and Their Implications

Some of the most common fringe benefits include:

• Car Benefits – If employees use company vehicles for private purposes, this is subject to FBT. Employers should keep accurate logbooks and consider using the operating cost method to potentially reduce liability.
• Entertainment Benefits – Meals, entertainment, and event expenses may be taxable unless they qualify as minor or exempt benefits.
• Expense Payment Benefits – Payment or reimbursement of costs including but not limited to, car expenses, gym memberships, health insurance.
• Remote Work Benefits – With hybrid work arrangements continuing, benefits such as home office equipment and work-related travel reimbursements need careful review to determine their FBT implications.

3. FBT Exemptions and Concessions

Some benefits are exempt from FBT or receive concessions, including:

• Work-related electronic devices – Laptops, phones, and tablets used primarily for work purposes may be exempt.
• Minor Benefits – If a benefit is valued at less than $300 and provided infrequently, it may be exempt.
• Electric Vehicles (EVs) Exemption – The EV FBT exemption continues for battery electric vehicles (BEVs) and hydrogen fuel cell vehicles below the luxury car tax threshold. Important update: from 1 April 2025, plug-in hybrid electric vehicles (PHEVs) no longer qualify for the exemption, except under transitional arrangements for vehicles ordered before this date. If you’re considering salary packaging an EV, make sure it’s a pure electric or hydrogen vehicle to maintain the tax benefit.

4. Record-Keeping and Compliance

The Australian Taxation Office (ATO) continues to focus on compliance, particularly in high-risk areas such as car fringe benefits and entertainment expenses. Employers should:

• Maintain accurate records of benefits provided, including logbooks, receipts, and declarations.
• Regularly review salary packaging arrangements to ensure compliance.
• Use the ATO’s online FBT calculators and tools to estimate liabilities.

5. ATO Focus Areas for the 2025–26 FBT Year

The ATO has flagged several areas they’ll be watching closely during this FBT year:

• Car fringe benefits – Particularly private use of work vehicles and logbook compliance
• Entertainment and meal expenses – Ensuring proper classification and exemption claims
• Electric vehicle exemptions – Checking eligibility criteria are met, especially with the new PHEV exclusion
• Salary packaging arrangements – Reviewing whether benefits are correctly valued and reported

If you’re claiming exemptions or concessions in any of these areas, make sure your records are watertight and your calculations are spot-on.

What Are the FBT Reporting Requirements for Employers in 2026?

In 2026, employers in Australia must follow specific reporting requirements for Fringe Benefits Tax (FBT) to ensure compliance with the Australian Taxation Office (ATO) regulations. Key requirements include:

• Annual FBT Return: Employers must lodge an FBT return annually, covering the FBT year from April 1 to March 31.
• Report Non-Cash Benefits: Employers must report all non-cash benefits provided to employees, including details of each benefit and its taxable value.
• Include Exemptions and Concessions: Any applicable FBT exemptions or concessions must be clearly stated in the return.
• Accurate Record-Keeping: Businesses must maintain detailed records of all benefits provided, such as logbooks for cars or receipts for entertainment expenses.
• Timely Submission: Failure to submit the FBT return on time or inaccuracies in the reporting can result in penalties, so it’s important for businesses to ensure they meet the deadlines and requirements set by the ATO.

How Can Accounting Services Help You Comply with FBT Regulations?

Accounting services play a vital role in helping businesses navigate the complexities of FBT compliance in Australia. Tax advisors can assist with calculating the taxable value of fringe benefits, ensuring that all benefits are correctly reported and all available exemptions are applied. Accounting services also provide guidance on maintaining the required records, such as logbooks for cars or receipts for entertainment expenses, to meet the ATO’s strict compliance standards. By working with tax planning professionals, businesses can reduce the risk of errors, avoid penalties, and ensure they are meeting their FBT obligations efficiently and accurately.

Managing FBT tends to fall into the “too complex” basket of business ownership – we can take care of the strategy, compliance and lodgement for you. Give us a buzz if you need any assistance with FBT.

Contact information:

Name: Future Advisory
Email: [email protected]
Phone: 1300 225 888
Google Maps: https://www.google.com/maps?cid=6437415810719387516 

FAQ 

How can my business reduce its FBT liability?

Smart ways to reduce FBT include:

• Offering FBT-exempt benefits wherever possible
• Using the operating cost method for vehicles (with logbooks)
• Ensuring gifts and entertainment meet the minor benefits exemption
• Reviewing your salary packaging strategy with a tax advisor

Pro tip: The minor benefits threshold is $300, and the benefit must be infrequent and not a reward for performance.

What is Fringe Benefits Tax in Australia?

Fringe Benefits Tax (FBT) is a tax paid by employers on non-cash perks provided to employees, like company cars, housing, or reimbursements. If your business is unsure what counts as a fringe benefit, our accountants in Melbourne CBD can help assess your obligations.

How Is FBT Different from Income Tax?

Let’s keep it simple — employers pay FBT on non-cash benefits, while income tax is paid by employees on their salary. To ensure your setup is compliant in 2025, speak to our Accountants in Cremorne for tailored advice.

Understanding the difference matters in 2025, especially if you want to stay compliant and avoid any tax surprises. Here’s a quick side-by-side to make things crystal clear:

What records do I need to keep for FBT compliance?

You’ll need car logbooks, receipts, employee declarations, and documentation of benefit usage. A small business bookkeeping service like ours ensures everything is recorded properly for ATO audits.

When do I need to lodge my FBT return?

The FBT year ends on 31 March 2025. Paper lodgement is due by 21 May, and electronic lodgement via a tax agent is due by 25 June. Talk to our Accountants in Narre Warren to ensure you’re on track with deadlines.

Do I still need to lodge if no FBT is payable?

Yes. Lodging a ‘nil’ FBT return limits the ATO’s audit period to three years. Not lodging at all means the ATO can review your records at any time.

Can Xero help manage my FBT reporting?

Yes! With the right setup, Xero can track fringe benefits, calculate liabilities, and generate reports for easier compliance. Let our Xero accountants help you streamline your FBT workflow.