05-03-2025

Understanding Fringe Benefits Tax (FBT) and Its Impact on Your Business in 2025.

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)?

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.

ItemSee
AccommodationAccommodation and location related fringe benefits
Borrowing employer’s propertyResidual fringe benefits
Exempt use of eligible vehicles
BriefcaseWork-related items exempt from FBT
CarCars and FBT
Car expensesExpense payment fringe benefits
Car, leasedCar leasing and FBT
Christmas partyEntertainment-related fringe benefits
Computer, desktopReimbursing cost of computer:Expense payment fringe benefits
Providing computer:Property fringe benefits
Health insurance premiumsReimbursing cost of insurance:Expense payment fringe benefits
Providing insurance:Residual fringe benefits
Computer, laptop or tabletWork-related items exempt from FBT
Covid-19 vaccinationCOVID-19 vaccination incentives and rewards for employees
Credit cardExpense payment fringe benefits
Debt, forgivingLoan and debt waiver fringe benefits
Electric carElectric cars exemption
Food and drinkEntertainment-related fringe benefits
GoodsProperty fringe benefits
Home mortgageExpense payment fringe benefits
Housing accommodationHousing fringe benefits
InsuranceReimbursing cost of insurance:Expense payment fringe benefits
Providing insurance:Residual fringe benefits
MealsBoard fringe benefitsEntertainment-related fringe benefits
Internet, homeExpense payment fringe benefits
Living-away-from-home allowanceLiving-away-from-home allowance fringe benefits
LoanLoan and debt waiver fringe benefits
Mobile phoneWork-related items exempt from FBT
ParkingCar parking and FBT
Protective clothingWork-related items exempt from FBT
Real estateProperty fringe benefits
RecreationEntertainment-related fringe benefits
Redundancy retraining or reskillingRetraining and reskilling exemption
Remote area housingRemote area FBT concessions
Self-education expensesExpense payment fringe benefits
ServicesResidual fringe benefits
Shares and bondsProperty fringe benefits
SoftwareWork-related items exempt from FBT
Support in an emergencyEmergency assistance
Taxi or ride-share travelTaxi, ride-sourcing and public transport exemptions
Telephone, home landlineExpense payment fringe benefits
Telephone, mobileWork-related items exempt from FBT
TollsRoad and bridge tolls and FBT
Tools of tradeWork-related items exempt from FBT
Vehicle, commercialExempt use of eligible vehicles

Disclaimer:
The information on this website and the links provided are for general information only and should not be taken as constituting professional advice from Hall Browns Accountants. You should consider seeking the appropriate legal, financial, or taxation advice to check how the website information relates to your unique circumstances.

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