Fringe benefits tax (FBT) operates on its own reporting cycle. Instead of following the standard income tax year, the FBT year runs from 1 April to 31 March. With 31 March 2026 approaching, employers may want to review any benefits you’ve provided to your staff during the current FBT period.
Understanding fringe benefits tax
FBT is a tax that applies to certain benefits employers provide to their employees or their employees’ associates. Unlike income tax, which is paid by your individual employees on their earnings, FBT is paid by you as the employer on the value of specific non-cash benefits. These benefits are often described as employee perks. They can include things such as access to a company vehicle, subsidised gym memberships, parking, entertainment expenses, accommodation costs, or the payment of school fees. However, regular salary or wages, approved employee share scheme benefits, and employer superannuation contributions aren’t considered fringe benefits.
Guidance from the ATO explains which items fall within the FBT rules and which may qualify for exemptions. In some situations, a benefit that might normally attract FBT may be excluded.
Calculating the taxable value of benefits
After identifying which benefits are subject to FBT, the employer must determine each benefit’s taxable value. To do this, the value of the benefit is generally “grossed up”. This step adjusts the value of the benefit to reflect the equivalent salary an employee would need to earn to purchase the item using after-tax income.
Two gross-up rates apply: 2.0802 when the employer can claim a goods and services tax (GST) credit for the benefit; and 1.8868 when no GST credit is available. Where a GST credit is available, the taxable value of the benefit is multiplied by 2.0802, and the FBT rate of 47% is then applied. The employer then lodges an FBT return and pay any tax owing for the year.
Possible tax deductions
While FBT can add an extra compliance step for businesses, there can also be some tax advantages. In many cases, employers who pay FBT can claim an income tax deduction for the amount of FBT paid in the financial year in which the liability arises. Your business may also be able to claim a GST credit and a deduction for the cost of providing the fringe benefit, depending on the circumstances.
Getting ready to lodge
Because the FBT year ends on 31 March, now is an appropriate time to check your business’s records and review any employee benefits provided during the year. Employers who prepare and lodge their own FBT return generally need to do so by 21 May. The deadline may extend to 25 June where the employer is registered as an FBT client with a registered tax agent by 21 May and the agent lodges the return on their behalf.