Fringe Benefits Tax (FBT) is an important consideration for employers who provide additional perks to their employees. Whether it’s a company car, free gym memberships, or entertainment benefits, these perks may be subject to FBT. Understanding how FBT works can help businesses remain compliant and avoid unnecessary tax liabilities.
In this article, we’ll break down the basics of FBT, common fringe benefits, and strategies to minimize FBT liability.
What Is Fringe Benefits Tax (FBT)?
FBT is separate from income tax and applies to non-cash benefits given to employees or their families. It is calculated based on the taxable value of the benefits and is paid by the employer, not the employee. The FBT year runs from 1 April to 31 March each year.
Common Fringe Benefits Subject to FBT
Here are some of the most common benefits that attract FBT:
1. Car Fringe Benefits
If an employee uses a company car for private purposes, FBT applies. Even parking the car at home overnight counts as personal use.
✅ Tip: Use the logbook method to track business-related travel and reduce FBT liability.
2. Entertainment Benefits
Providing employees with free meals, event tickets, or holiday accommodation can attract FBT. This includes Christmas parties, team lunches, and other social events.
✅ Tip: Keep expenses under $300 per person to qualify for the minor benefits exemption.
3. Expense Payment Benefits
If an employer pays for an employee’s personal expenses, such as school fees, health insurance, or personal loan repayments, these are subject to FBT.
✅ Tip: If the expense is work-related, the employer may be able to classify it as a business expense instead.
4. Housing and Accommodation Benefits
Providing employees with rent-free housing or at a reduced rent can trigger FBT.
✅ Tip: Employers may be eligible for exemptions if housing is necessary for employees in remote areas or living away from their usual place of residence to carry out their duties.
5. Loan Fringe Benefits
If an employer provides an interest-free or low-interest loan to an employee, the difference between the market interest rate and the rate charged is subject to FBT.
✅ Tip: Charge an interest rate at the ATO’s benchmark to avoid FBT.
FBT Exemptions and Reductions
Some fringe benefits are exempt from FBT or attract concessional treatment under ATO rules. These include:
🔹 Minor benefits exemption – If a benefit is valued at less than $300, it may be exempt from FBT.
🔹 Work-related items exemption – If an employee is provided with tools, protective gear, or electronic devices for work purposes, they may be exempt from FBT.
🔹 Superannuation contributions – Extra employer contributions to super are not subject to FBT.
Final Thoughts
Fringe Benefits Tax can be complex, but understanding how it works and applying the right strategies can help businesses manage FBT costs while still offering attractive benefits to employees. Whether you’re an employer looking to optimize tax efficiency or an employee considering salary packaging, staying informed about FBT rules is essential.
