Fringe Benefits Tax (FBT) is a critical consideration for Australian businesses, yet it remains an area that many employers struggle to navigate effectively.
With recent changes to FBT regulations coming into effect in 2025, it’s essential for business owners to stay informed, ensure compliance, and optimise their tax positions.
This article breaks down what FBT is, the types of benefits it applies to, key updates for 2025, and how it impacts business owners.
What We’ll Cover:
- What is Fringe Benefits Tax (FBT)?
- Types of Fringe Benefits
- How FBT Impacts Business Owners
- Recent Changes to FBT in 2025
- How Hall Browns Can Help
- ATO Benefits Quick Reference Guide
What is Fringe Benefits Tax (FBT)?
FBT is a tax employers pay on certain benefits they provide to their employees (or their employees’ associates, such as family members) in addition to their salary or wages.
Unlike income tax, which is paid by employees, FBT is an employer’s responsibility and is calculated based on the taxable value of the fringe benefit.
FBT applies to a range of non-cash benefits, including company cars, entertainment expenses, low-interest loans, and even discounted goods and services. The tax ensures that benefits provided outside of standard wages are appropriately taxed to prevent salary packaging loopholes.
The FBT year runs from 1 April to 31 March, with businesses required to lodge their FBT return annually.
Types of Fringe Benefits
Several types of benefits can trigger an FBT liability for employers. The most common include:
1. Car Benefits
If an employer provides an employee with a company vehicle that’s available for private use, it’s subject to FBT. This includes cases where the car is parked at the employee’s home overnight.
2. Entertainment Benefits
This includes expenses related to business lunches, corporate events, and other entertainment costs such as tickets to concerts or sporting events.
3. Expense Payments
If an employer reimburses an employee’s private expenses, such as home internet or health insurance, these payments may attract FBT.
4. Loan Benefits
Providing employees with loans at a lower interest rate than the official benchmark can result in an FBT liability.
5. Housing & Living Away from Home Allowances
Providing employees with housing benefits or allowances when relocating for work can attract FBT unless specific exemptions apply.
Some benefits are FBT-exempt, such as work-related items (e.g., laptops, mobile phones), certain relocation expenses, and minor benefits valued under $300.
How FBT Impacts Business Owners
Understanding FBT isn’t just about compliance – it also affects financial planning, employee benefits strategies, and business cash flow.
1. Compliance Risks
Incorrect FBT reporting may result in penalties, interest charges, and unnecessary scrutiny from the ATO.
2. Increased Costs for Business Owners
Employers bear the cost of FBT, which is currently 47% of the taxable value of the fringe benefit.
3. Strategic Tax Planning Opportunities
- Providing FBT-exempt benefits.
- Using salary sacrifice arrangements.
- Switching from taxable benefits to non-taxable alternatives.
4. Employee Attraction & Retention
Offering perks can be a great way to attract and retain top talent, but businesses must manage tax costs effectively.
Recent Changes to FBT in 2025
1. Plug-in Hybrid Electric Vehicle (PHEV) Exemptions Ending
From 1 April 2025, plug-in hybrid electric vehicles (PHEVs) will no longer qualify for FBT exemptions.
2. Proposed Entertainment Expense Deduction for Small Businesses
A proposed $20,000 tax deduction for small businesses on business-related meal and entertainment expenses is under review.
How Hall Browns Can Help
Navigating FBT is complex, and failing to comply can lead to unexpected tax liabilities. At Hall Browns, we assist businesses with:
✔ FBT Compliance Reviews – Ensuring all taxable benefits are correctly reported.
✔ Tax-Effective Benefits Planning – Helping you choose perks that attract minimal FBT.
✔ Electric Vehicle FBT Planning – Advising on sustainable fleet strategies.
✔ Entertainment & Expense Strategy – Managing deductible and non-deductible costs.
Need expert guidance on managing FBT? Reach out to Hall Browns today.
ATO Benefits Quick Reference Guide
Below, you will find the ATO’s list of common benefits, with a link to their site.
Disclaimer: This has been directly copied across from the ATO website, and as such is not being updated regularly. For their most up to date version, click here.