The Fringe Benefits Tax (FBT) year is wrapping up on 31 March, so now’s the time to check your obligations and ensure you're compliant.
We see many businesses that provide fringe benefits and don’t realise they could be liable for FBT. Failing to meet these obligations can mean penalties or unexpected tax bills.
Here’s what you need to know before the deadline.
What is a Fringe Benefit?
FBT applies when your business provides perks to your employees that isn’t part of their salary. Common benefits include:
- Allowing employees to use a company car for personal reasons.
- Providing parking on the premises.
- Paying for study courses or training.
- Giving tickets to concerts or sports events.
- Hosting holiday parties or events.
- Offering gifts to employees.
Do you need to lodge an FBT return?
Even if no FBT is payable, it’s still a good idea to lodge a nil return. This signals to the ATO that you’ve reviewed your position and reduces the risk of an audit. Many businesses mistakenly assume they don’t need to lodge – but failing to do so could lead to questions about whether benefits were overlooked.
Key updates for this year.
Electric Vehicle (EV) FBT exemption.
The FBT exemption for eligible electric vehicles remains a valuable tax-saving opportunity. Employers can provide qualifying EVs to employees without incurring FBT if:
- The car is battery-electric, hydrogen fuel cell, or plug-in hybrid electric.
- Its first retail sale was after 1 July 2022.
- It falls under the luxury car tax threshold ($91,387 for fuel-efficient vehicles in 2024–25).
Important note: From 1 April 2025, plug-in hybrid electric vehicles (PHEVs) will no longer qualify.
Proposed $20,000 Entertainment Deduction
The Opposition Government has proposed a $20,000 tax deduction for business-related entertainment expenses, potentially removing FBT on these costs. If passed, this could mean significant tax savings for small businesses.
However, it’s not law yet and will only move forward if the Opposition wins the next federal election – and even then, it must go through the legislative process.
But, until then, entertainment expenses provided to employees still trigger FBT, so businesses should track these costs carefully.
Common FBT mistakes to avoid.
- Poor record-keeping: The ATO requires businesses to keep detailed records.
- Incorrectly claiming exemptions: Some items are only exempt if they’re mainly used for work.
- Forgetting about directors: Non-cash perks for directors can attract FBT.
- Not properly understanding entertainment exemptions: These can be tricky as not all gifts or functions are exempt.
Step-by-step guide: How to prepare for FBT.
- Maintain records
- Review all benefits
- Check exemptions
- Use salary packaging smartly
- Lodge a return
- Talk to your accountant early
Very soon we’ll be celebrating the end of the FBT year! So, now’s the time to ensure your records are in order.
Need help? Get in touch with our expert team today to ensure you're compliant and not overpaying tax.
This article is for informational purposes only and does not constitute financial advice. Contact us today to discuss your specific needs.
Stuart is an expert in creating and implementing wealth strategies for his clients. He helps them with tax structuring, debt reduction, and asset protection. He is a Partner in the Specialist Medical Services division, offering accounting and financial services to medical and dental professionals and private clients and businesses.
