Fringe Benefits Tax (FBT): What Business Owners Need to Know

Fringe Benefits Tax (FBT): What Business Owners Need to Know

If your business provides non-cash benefits to employees—like a company car, entertainment, or reimbursed expenses—you may be liable for Fringe Benefits Tax (FBT). It’s one of the most overlooked areas of tax compliance, yet it can have a significant impact if not handled correctly.
Here’s what you need to know about FBT, the common types of fringe benefits, and how to stay compliant.

What is Fringe Benefits Tax?

Fringe Benefits Tax (FBT) is a tax employers pay on certain benefits provided to employees (or their associates, like family members) on top of their salary or wages.
FBT is separate from income tax and is calculated on the taxable value of the benefit.
FBT is assessed annually for the period 1 April to 31 March.

Common Types of Fringe Benefits

Here are some typical examples of benefits that may attract FBT:

•  1. Car Benefits: Providing a company car for private use (even occasional use like commuting) is one of the most common fringe benefits. You’ll either use the statutory method or the operating cost (logbook) method to calculate FBT.
• 2. Entertainment: Meals, drinks, event tickets, or recreational activities provided to employees are often considered entertainment benefits and may attract FBT.
• 3. Expense Payments: If your business pays or reimburses personal expenses for employees—such as school fees, private phone bills, or home internet—that could be a fringe benefit.
• 4. Housing: Providing housing or accommodation allowances can attract FBT, particularly in metro areas or for high-income earners.
• 5. Loan Benefits: Interest-free or low-interest loans to employees must be reported and may be subject to FBT.

How Is FBT Calculated?

FBT is calculated based on the grossed-up taxable value of the benefit. The gross-up factor ensures that the benefit reflects the pre-tax income an employee would have had to earn to receive the same benefit after tax.

There are two gross-up rates:

• Type 1 (where GST is claimable): 2.0802
• Type 2 (where no GST is claimable): 1.8868

Can FBT Be Reduced?

Yes! You can reduce your FBT liability by:

• Using the logbook method for cars (if business use is high)
• Using the minor benefits exemption (for benefits under $300, provided occasionally)
• Providing work-related items (e.g. laptops, mobile phones used for work)
• Applying the otherwise deductible rule (if the benefit would’ve been deductible to the employee personally)

FBT Reporting & Payment

Employers must:

• Calculate and pay FBT annually (due 21 May for payment and 25 June for lodgment via tax agent)
• Lodge an FBT return with the ATO if FBT is payable
• Report certain fringe benefits on employees’ PAYG summaries (if benefits exceed $2,000)

Common Mistakes to Avoid

• Not recognising occasional personal use of work vehicles
• Reimbursing employee expenses without FBT consideration
• Misunderstanding entertainment vs. meal expenses
• Missing out on FBT exemptions and concessions

Need Help Navigating FBT?

FBT can be tricky—and the penalties for incorrect or late lodgement can be significant. If your business provides any non-cash benefits to employees or directors, it’s worth reviewing your position before the FBT year ends.

Contact us today for an FBT health check or to prepare your 2025 FBT return. We’ll help you identify any exposure, reduce your liability, and stay compliant.

The Importance of Maintaining a Logbook for Tax Purposes

A Must-Have for Business Owners, Freelancers & Company Car Users
If you use a vehicle for business purposes, maintaining a logbook is one of the most valuable—and often overlooked—ways to support your tax claims and reduce your Fringe Benefits Tax (FBT) liability.

Whether you’re a sole trader using your personal car for work or a business providing vehicles to employees, keeping an accurate logbook can lead to significant tax savings.

Why Do You Need a Logbook?

A logbook is essential for two key tax areas:

• Claiming Car Expenses (for Sole Traders or Businesses):
  If you want to claim a percentage of your car expenses (fuel, servicing, insurance, depreciation) based on business use, the ATO requires a 12-week logbook to calculate that percentage.Without it, you’re limited to the cents-per-kilometre method, which caps your claim at 5,000 km.
• Reducing FBT on Company Vehicles:
  If your business provides a car to an employee (or director), and the vehicle is available for any private use, it may trigger Fringe Benefits Tax (FBT).Using the logbook (operating cost) method allows you to apportion costs between business and private use—and potentially lower your FBT liability compared to the flat statutory 20% method.

What Should Your Logbook Include?

To be accepted by the ATO, your logbook must include:

• Start and end date of the 12-week logbook period
• Odometer readings at the start and end of the period
• Odometer reading for every trip
• Reason for each trip (e.g., client meeting, site visit)
• Whether the trip was business or private
• Total business vs. private kilometres over the period

The logbook must cover a continuous 12-week period and be updated every 5 years—or sooner if your vehicle usage changes significantly.

Example Entry

Benefits of Keeping a Logbook

• Maximise deductions: Accurately claim business-related car expenses
• Minimise FBT: Logbook method often results in lower tax than the statutory method
• Stay compliant: Meet ATO documentation requirements
• Peace of mind: You’ll have solid records in case of an audit

Bonus Tip: Use a Logbook App

Apps like ATO myDeductions, Driversnote, or Vehicle Logbook make it easier to record trips on the go and export reports at tax time.

Final Word

A logbook is a small effort with big rewards. Whether you’re lodging a tax return or preparing for FBT season, accurate vehicle records can save you money—and protect you from penalties.

Need help with your deductions or FBT calculations? Contact us today—we can review your logbook, help set one up, or assess which method gives you the best outcome.