The Fringe Benefit Tax year for 2024/25 ended on 31 March 2025. It is important for SME businesses to review their obligations to ensure that any FBT is paid over the next couple of months.
Fringe Benefit Tax - or FBT - is a tax that employers are obligated to pay on the taxable value of certain non-cash payments given to employees where the benefit is part of income earned.
Amongst the most common benefits that can give rise to FBT are as follows:
- providing a car to an employee that can also be used for private purposes;
- providing your staff with "entertainment", such as meals, drinks, leisure, or sporting pursuits (e.g. tickets to sporting events/theatre tickets);
- providing free or subsidised car parking for your employees in a commercial carpark;
- reimbursing an employee for private expenses or payment directly to a third-party on the employee’s behalf (i.e. school fees, health insurance premiums, phone bills, etc);
- giving your employee a loan with no interest charges; or
- providing accommodation rent free or at a reduced rent
During this time of year, many employers will be considering their FBT reporting obligations and potential strategies to minimise their liability. Fringe Benefit tax is levied at 47% - the top marginal tax rate for an individual.
Annual FBT Changes & Key Updates
There have been several significant developments for employers when determining their FBT liability for 2025 and beyond.
Electric Car Exemption
As per the updates to the FBT legislation last year for electrical vehicles that are provided to employees in the course of their employment. The amendments to the act have provided an FBT exemption for electric vehicles if they meet the following criteria:
- The vehicle must meet the definition of a car under FBT legislation.
- The car must be battery electric, hydrogen fuel cell or plug-in hybrid
- The car must be first held on or after 1 July 2022
- The original retail sale price must be below the luxury car tax threshold of $89,332
To utilise the operating cost method for calculation of FBT, there will need to be a logbook kept for a continuous 12 week period that accurately represents the travel patterns of the employee.
However, when there are any expenses paid for or reimbursed by an employer (such as electricity, maintenance etc) this may have FBT implications as it is the purchase of the vehicle that has the exemption.
ATO's FBT Focus for the Year Ahead
It is worth noting several of the key audit areas the ATO will be focusing on for the next 12 months.
These audit targets focus on areas that the ATO believe a FBT liability should occur, commonly found non-reporting areas, reviews of past year returns, and industry comparisons.
We have highlighted some of these potential areas below.
Benefits provide by third parties
Many employers believe when a third party supplies a benefit to their employees, such as a client or supplier they do not have an obligation, this is not always the case. There are two scenarios:
- Under an arrangement between the employer and a third party to provide a fringe benefit such as carpark etc to their employees.
- Employer participates, facilitates or promotes benefits to be provided to their employees.
Lifestyle Assets
The ATO has announced that lifestyle assets are an area of focus for FBT audits. These assets are broadly referred to as high value asset that are used for personal enjoyment rather than business use. The ATO has increased their use of data matching programs to ensure compliance with FBT obligations.
Customer Loyalty Programs
The ATO has recently made amendments to their guidance on whether customer loyalty point programs will be subject to FBT.
There needs to be a material and sufficient connection with the employee’s employment. The ATO has confirmed they will only review for FBT purposes if one of the following criteria are met:
- More than 250,000 frequent flyer points per year
- Benefits are suggested to be a substitute for income that otherwise would be earned
- There is no commercial purpose other then to allow the employee to receive these benefits.
As well as the above benefits, the ATO will continue to scrutinise the benefits provided to employees that they have been reviewing in prior years. It is important that the employers are ensuring that they continue to review their obligations for FBT.
Purchase of Motor Vehicle
It is important to highlight that where you purchase a vehicle to be used for business purposes, this alone does not mean the asset is exempt from FBT liabilities. In cases where the work-vehicle is used for private purposes, an FBT obligation is likely to apply.
Employee Business Travel
One area for scrutiny for the ATO this FBT year will be employee business travel that is provided for by the employer. It is important that an employer receives written evidence from the employee to substantiate the claim.
If the business travel contains a private component, the otherwise deductible rules does not apply to the extent of the private component. If there is a private portion of the required travel and/or any travel that is longer than five nights will require a travel diary to be kept.
Not Lodging FBT Returns
It is often seen that employers believe they are not required to lodge an FBT Return, in the instance they determine themselves not to have such liabilities.
If your business employs staff and is not registered for FBT, it is essential you have reviewed your position and are certain that you do not have an FBT liability.
Where the business provides cars, car spaces, reimburses private (not business) expenses, provides entertainment (food & drink), employee discounts, etc. then the business is potentially providing a fringe benefit.
For More Information
If you would like more assistance with your FBT obligations or additional information, please contact an Archer Gowland Redshaw adviser on (07) 3002 2699 | info@agredshaw.com.au
