Fringe benefits tax (FBT) is a tax Australian employers pay on certain non-cash benefits given to employees or their associates, such as private use of a work car or a gym membership. It's charged at 47% of the grossed-up value of the benefits for the FBT year running 1 April to 31 March, and returns are due by 21 May, as of October 2026.
Perks are a great way to reward a team, but in Australia the tax lands on the employer, not the employee, and it's separate from income tax. If you run a small business, here's what the ATO says about what's caught, what isn't, and what it costs.
What counts as a fringe benefit
The ATO describes a fringe benefit as like a payment to an employee, in a different form to salary or wages. Its examples:
- Letting an employee use a work car for private purposes
- Free tickets to concerts or other entertainment
- Reimbursing a personal expense, such as school fees
- Benefits under a salary sacrifice arrangement
FBT applies to benefits for employees and their families or other associates, even when a third party provides the benefit under an arrangement with you.
What isn't subject to FBT
| Not a fringe benefit | ATO position |
|---|---|
| Salary and wages | Taxed as income instead |
| Employer contributions to complying super funds | Listed by the ATO as not a fringe benefit |
| Benefits to yourself as a sole trader or partner | You aren't an employee |
| Entertainment for clients | Clients aren't employees |
| Benefits to volunteers and contractors | Listed by the ATO as not a fringe benefit |
| Approved employee share scheme shares, and certain termination payments | Listed by the ATO as not a fringe benefit |
How FBT is worked out
You gross up the taxable value of the benefit to what an employee would have to earn, at the top marginal rate including the Medicare levy, to buy it themselves. Then you apply the 47% FBT rate.
| Item | As of October 2026 (FBT years ending 31 March 2023 to 2027) |
|---|---|
| FBT rate | 47% |
| Type 1 gross-up rate (you can claim GST credits) | 2.0802 |
| Type 2 gross-up rate (no GST credits) | 1.8868 |
The ATO's own example makes the cost real. Jenni runs a small consulting firm and gives her employee a gym membership costing $1,100, including $100 GST. The taxable value of $1,100 times the 2.0802 gross-up rate times 47% means FBT of $1,075.46. That's nearly the cost of the membership again, which is the insight most owners miss: an FBT-taxable perk can cost close to double.
Cars: the most common FBT benefit
Private use of a work car is the first example the ATO gives of a fringe benefit, and cars have their own rules. A flat statutory rate of 20% applies to all car fringe benefits provided from 1 April 2014, regardless of the distance travelled. The ATO publishes a car calculator to work out the taxable value. For electric cars charged at home, it allows a home charging rate of 5.47 cents per kilometre for the FBT year starting 1 April 2026, up from 4.20 cents in earlier years. Keep records of the car's cost and use from day one, because you'll need them for the calculation.
Exemptions that save small businesses tax
Two exemptions matter most for small teams, and both have limits worth knowing:
- Minor benefits: a benefit is exempt if its notional taxable value is less than $300 and it would be unreasonable to treat it as a fringe benefit. Connected benefits, like a meal, a night's accommodation and a taxi, are each tested against $300 separately.
- Work-related items: portable electronic devices are exempt if they're mainly used for work, along with items like software, protective clothing and tools of trade. Small businesses, with aggregated turnover under $50 million, can give an employee more than one device a year even if they do the same job.
The ATO also points out that you can reduce FBT by using alternatives, such as a cash bonus, which is taxed as wages instead. For the employee side of claiming work costs, see my guide to work from home deductions in Australia.
Reporting and the payment summary
If an employee's benefits have a taxable value over $2,000 in an FBT year, you report the grossed-up amount on their income statement, always using the lower gross-up rate. The minimum reportable figure is $3,773. The ATO's example: a taxable value of $2,000.01 for the year ending 31 March 2026 gives a reportable amount of $3,773. Employees sometimes ask what this figure means for their own tax, so it helps to understand how the tax-free threshold and their income statement fit together before the questions come.
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Lodging and paying
- Track every benefit through the FBT year, 1 April to 31 March.
- Work out the taxable value of each one and apply the right gross-up rate.
- Lodge your FBT return and pay by 21 May, or generally 25 June if a tax agent lodges electronically and you're on their FBT client list by 21 May.
- If you're registered but have nothing to lodge, send a notice of non-lodgment by the normal due date.
- If your FBT was $3,000 or more for the year, expect to pay quarterly instalments through your activity statement the next year.
My verdict
FBT is one of those taxes that's invisible until it bites. The rule of thumb I'd use: before giving any non-cash perk, check the minor benefits and work-related exemptions, because a taxable one can cost nearly twice its price once FBT is added. Laptops and phones mainly used for work are usually the cleanest perks a small business can offer.
Frequently asked questions
What is fringe benefits tax?
A tax Australian employers pay on certain non-cash benefits provided to employees or their associates, separate from income tax.
What is the FBT rate?
47% of the grossed-up taxable value, as of October 2026, for FBT years ending 31 March 2023 to 2027.
When is the FBT year?
1 April to 31 March.
When is the FBT return due?
21 May, or generally 25 June if a tax agent lodges electronically and you're their FBT client by 21 May.
What is the minor benefits exemption?
A benefit with a notional taxable value under $300 is exempt if it would be unreasonable to treat it as a fringe benefit.
Do sole traders pay FBT on benefits to themselves?
No. A sole trader or partner isn't an employee, so benefits you provide to yourself aren't subject to FBT.
